PYRAMID SAIMIRA THEATRE LIMITED (Formerly known as Pyramid Entertainment Limited)

Transcription

1 C M Y K RED HERRING PROSPECTUS Please read section 60B of thecompanies Act, 1956 Dated: November 30, % Book Built Issue PYRAMID SAIMIRA THEATRE LIMITED (Formerly known as Pyramid Entertainment Limited) Our Company was incorporated as Pyramid Films International Private Limited on 20/06/1997 under Companies Act, 1956, with the Registration No The name of our Company was changed to Pyramid Films International Limited w.e.f. 10/08/2000. Subsequently it was changed to Pyramid Entertainment and Softsystems Limited w.e.f. 14/08/2000 and was further changed to Pyramid Entertainment Limited w.e.f. 01/01/2002. The name was further changed to Pyramid Saimira Theatre Limited w.e.f. 23/08/2004 under the Companies Act, 1956 and a fresh certificate of Incorporation was received from the Registrar of Companies, Tamilnadu. For details on changes to our Registered Office, please refer to the chapter titled "History and Other Corporate Matters" on page 66 of this Red Herring Prospectus.) Registered Office : C-1, II Floor, Temple Towers, # 672 Anna Salai, Nandanam, Chennai Tel: ; Fax: ; pstl@pstl.in; Website: Contact Person: Mr. R. Manthramurthy, Company Secretary PUBLIC ISSUE OF [ ] EQUITY SHARES OF RS. 10 EACH AT A PRICE OF RS. [ ] PER EQUITY SHARE FOR CASH AGGREGATING RS. 8, LAKHS (HEREINAFTER REFERRED TO AS THE ISSUE ), INCLUDING PROMOTERS CONTRIBUTION OF [ ] EQUITY SHARES OF RS. 10 EACH AT A PRICE OF RS. [ ] PER EQUITY SHARE FOR CASH AGGREGATING RS. [ ] LAKHS (HEREINAFTER REFERRED TO AS THE PROMOTERS CONTRIBUTION ), AND EMPLOYEES RESERVATION OF [ ] EQUITY SHARES OF RS. 10 EACH AT A PRICE OF RS. [ ] PER EQUITY SHARE FOR CASH AGGREGATING RS. [ ] LAKHS. (HEREINAFTER REFERRED TO AS THE EMPLOYEES RESERVATION ). THE ISSUE LESS THE PROMOTERS CONTRIBUTION AND EMPLOYEES RESERVATION SHALL BE HEREINAFTER REFERRED TO AS THE NET ISSUE. THE ISSUE WILL CONSTITUTE [ ]% OF THE POST ISSUE PAID-UP CAPITAL OF THE COMPANY. THE NET ISSUE WILL CONSTITUTE [ ]% OF THE POST ISSUE PAID-UP CAPITAL OF THE COMPANY PRICE BAND: Rs. 88 TO Rs. 100 PER EQUITY SHARE THE ISSUE PRICE IS 8.8 TIMES OF THE FACE VALUE AT THE LOWER END OF THE PRICE BAND AND 10 TIMES OF THE FACE VALUE AT THE HIGHER END OF THE PRICE BAND In case of revision in the Price Band, the Bidding Period shall be extended for three additional working days after such revision, subject to the Bidding Period not exceeding 10 working days. Any revision in the Price Band, and the revised Bidding Period, if applicable, shall be widely disseminated by notification to the Bombay Stock Exchange Limited and National Stock Exchange of India Limited, by issuing a press release and by indicating the change on the websites of the Book Running Lead Manager, the Co-Book Running Lead Manager and the terminals of the member of the Syndicate. This Issue is being made through a 100% Book Building Process wherein up to 50% of the Net Issue shall be allotted on a proportionate basis to Qualified Institutional Buyers ( QIBs ). Further, at least 15% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and not less than 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. Further, [ ] Equity Shares shall be available for allocation on a proportionate basis to Employees, subject to valid bids being received at or above the Issue Price. RISK IN RELATION TO FIRST ISSUE This being the first issue of Equity Shares of the Company, there has been no formal market for the Equity Shares of the Company. The face value of the shares is Rs. 10 and the Floor Price is 8.8 times of the face value and the Cap Price is 10 times of the face value. The Price Band (as determined by the Company in consultation with the Book Running Lead Manager ( BRLM ) on the basis of assessment of market demand for the Equity Shares by way of book building) should not be taken to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares or regarding the price at which the Equity Shares will be traded after listing. The Company has not opted for grading of this Issue. GENERAL RISKS Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in this Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in this Issue. For taking an investment decision, investors must rely on their own examination of the Company and this Issue including the risks involved. The Equity Shares issued in this Issue have not been recommended or approved by the Securities and Exchange Board of India ( SEBI ), nor does SEBI guarantee the accuracy or adequacy of this Red Herring Prospectus. Specific attention of the investors is invited to the statements in the chapter titled Risk Factors beginning on page x of this Red Herring Prospectus. COMPANY S ABSOLUTE RESPONSIBILITY The Company having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to the Company and this Issue, which is material in the context of this Issue, that the information contained in this Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. LISTING The Equity shares of the company are proposed to be listed on The Bombay Stock Exchange Limited (BSE) (The Designated Stock Exchange) and National Stock Exchange of India Ltd. (NSE). The Company has received in-principle approval from BSE vide their letter no. DCS/SMD/S/2006 dated 22/09/2006 and from NSE vide their letter no. NSE/LIST/ dated 03/10/2006 for listing of the equity share being issued in terms of this Red Herring Prospectus. Pyramid Saimira Theatre Limited is a distinct company from and has no relationship with Piramyd Retail Ltd. BOOK RUNNING LEAD MANAGER (BRLM) KEYNOTE CORPORATE SERVICES LIMITED 307, Regent Chambers, Nariman Point, Mumbai Tel : Fax: pstl.ipo@keynoteindia.net Website: SEBI Regn. No. : INM Contact Person : Mr. Vikram Subramaniam REGISTRAR TO THE ISSUE CAMEO CORPORATE SERVICES LTD. Subramanian Building, No.1, Club House Road, Chennai Tel. : Fax : cameo@cameoindia.com Website: SEBI Regn. No. : INR Contact Person : Mr. R. D. Ramaswamy ISSUE SCHEDULE BID/ISSUE OPENS ON : DECEMBER 11, 2006 BID/ISSUE CLOSES ON : DECEMBER 18, 2006 C M Y K

2 TABLE OF CONTENTS Page No. DEFINITIONS AND ABBREVIATIONS... i Section I General Definitions and Abbreviations... i Presentation of Financial and Use of Market Data... viii Forward Looking Statements... ix Section II Risk Factors Risk Factors... x Section III Introduction Summary... 1 The Issue... 7 General Information... 8 Capital Structure Objects of The Issue Basis of Issue Price Statement of Tax Benefits Section IV About us Industry Our Business Regulations and Policies History and Other Corporate Matters Our Management Our Promoters and their Background Our Promoter Group Companies Related Party Transactions Dividend Policy Section V Financial Statements Report of our Statutory Auditors Management s Discussion and Analysis of Financial Conditions and Results of Operations Section VI Legal and Regulatory Information Outstanding Litigation, Material Developments and Other Disclosures Government / Statutory and Business Approvals Other Regulatory and Statutory Disclosures Section VII Issue Related Information Issue Structure Terms of the Issue Issue Procedure Section VIII Main Provisions of the Articles of Association of the Company Main Provisions of the Articles of Association of the Company Section IX Other Information Material Contracts and Documents for Inspection Declaration

3 SECTION I GENERAL DEFINITIONS AND ABBREVIATIONS Term Description Pyramid or the Company or Pyramid Saimira Theatre Limited, a company incorporated under the our Company or Pyramid Saimira Companies Act, Theatre Limited or PSTL or we or us and our GENERAL CONVENTIONAL TERMS Term Description Articles/ Articles of Association The Articles of Association of our Company. Auditors The statutory auditors of our Company, being M/s Mr.R.Mugunthan, Chartered Accountants Board of Directors / Board Companies Act Depositories Act Depository Depository Participant Director(s) Financial Year/ Fiscal/ FY Insurance Act Memorandum/ Memorandum of Association Non Resident NRI/ Non-Resident Indian Registered Office of the Company SEBI Guidelines SEBI Insider Trading Regulations TRS or Transaction Registration Slip The Board of Directors of our Company. The Companies Act, 1956, as amended from time to time. The Depositories Act, 1996, as amended from time to time. A depository registered with SEBI under the SEBI (Depositories and Participant) Regulations, 1996, as amended from time to time. A depository participant as defined under the Depositories Act. Director(s) of the Company unless otherwise specified. The period of twelve months ended March 31 of that particular year. Insurance Act, 1938, as amended from time to time. The Memorandum of Association of our Company. A person who is not resident in India except NRIs and FIIs. A person resident outside India, as defined under FEMA and who is a citizen of India or a person of Indian origin, each such term as defined under the FEMA (Deposit) Regulations, 2000, as amended. C-1, II Floor, Temple Towers, # 672 Anna Salai, Nandanam, Chennai The SEBI (Disclosure and Investor Protection) Guidelines 2000, as amended from time to time, including instructions, guidelines and clarifications issued by SEBI from time to time. The SEBI (Prohibition of Insider Trading) Regulations, 1992, as amended from time to time, including instructions and clarifications issued by SEBI from time to time. The slip or document issued by the members of the Syndicate to the Bidder as proof of registration of the Bid. i

4 PYRAMID SAIMIRA THEATRE LIMITED ISSUE RELATED TERMS AND ABBREVIATIONS Term Description Allotment/ Allotment of Unless the context otherwise requires, issue of Equity Shares pursuant Equity Shares to this Issue. Banker(s) to this Issue HSBC Ltd., HDFC Bank Ltd., Canara Bank, Standard Chartered Bank, Kotak Mahindra Bank Ltd., ICICI Bank Ltd. Bid An indication to make an offer, made during the Bidding Period by a prospective investor to subscribe to the Equity Shares at a price within the Price Band, including all revisions and modifications thereto. Bid Amount The highest value of the optional Bids indicated in the Bid-cum- Application Form and payable by the Bidder on submission of the Bid for this Issue. Bid/ Issue Closing Date The date after which the members of the Syndicate will not accept any Bids for this Issue, which shall be notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. Bid/ Issue Opening Date The date on which the members of the Syndicate shall start accepting Bids for this Issue, which shall be the date notified in a widely circulated English national newspaper, a Hindi national newspaper and a regional newspaper. Bid-cum-Application Form The form in terms of which the Bidder shall make an offer to subscribe to the Equity Shares of the Company and which will be considered as the application for allotment in terms of this Red Herring Prospectus. Bidder Any prospective investor who makes a Bid pursuant to the terms of this Red Herring Prospectus and the Bid-cum-Application Form. Book Building Process Book building mechanism as provided under Chapter XI of the SEBI Guidelines, in terms of which this Issue is made. BRLM Book Running Lead Manager to this Issue, in this case being Keynote Corporate Services Limited. CAN/ Confirmation of Allocation Note Cap Price Cut-off Designated Date The note or advice or intimation of allocation of Equity Shares sent to the Bidders who have been allocated Equity Shares after discovery of Issue Price in the Book Building Process. The upper end of the Price Band, above which the Issue Price will not be finalised and above which no Bids will be accepted. The Issue Price finalised by the Company in consultation with the BRLM and it shall be any price within the Price Band. A Bid submitted at the Cut-off Price by a Retail Individual Bidder is a valid Bid at all price levels within the Price Band. The date on which funds are transferred from the Escrow Account to the Public Issue Account after the Prospectus is filed with the Registrar of Companies, Tamil Nadu, following which the Board of Directors shall allot Equity Shares to successful Bidders. ii

5 Term Description Designated Stock Exchange Bombay Stock Exchange Limited Draft Red Herring Prospectus The Draft Red Herring Prospectus issued in accordance with Section 60B of the Companies Act, and submitted to SEBI on 31/07/2006, which does not have complete particulars on the price at which the Equity Shares are offered and number of shares being offered. It will become a Prospectus after filing with the Registrar of Companies, Tamil Nadu, after the Pricing Date. Employee/ Employees (in the All or any of the following: Employee Reservation Portion) a) A permanent employee of the Company; b) A director of the Company (whether a whole-time director, part time director or otherwise); An Employee, as used in the context of the Employee Reservation Portion, should be an Indian national, based in India and physically present in India on the date of submission of the Bid-cum-Application Form. Also, such person should be an Employee on the payroll of the Company on the date of filing the Red Herring Prospectus with the Registrar of Companies. Employee Reservation Portion The portion of the Issue being a maximum of [ ] Equity Shares available for allocation to Employees. Equity Shares Equity Shares of the Company of face value of Rs. 10 each unless otherwise specified in the context thereof. Escrow Account Account opened with Escrow Collection Bank(s) and in whose favor the Bidder will issue cheques or s in respect of the Bid Amount when submitting a Bid. Escrow Agreement Agreement to be entered into among the Company, the Registrar to this Issue, the Escrow Collection Banks and the BRLM in relation to the collection of the Bid Amounts and dispatch of the refunds (if any) of the amounts collected, to the Bidders. Escrow Collection Bank(s) The banks, which are registered with SEBI as Banker (s) to the Issue at which the Escrow Account for the Issue will be opened, in this case being HSBC Ltd., HDFC Bank Ltd., Standard Chartered Bank, Kotak Mahindra Bank Ltd., Canara Bank and ICICI Bank Ltd.. First Bidder The Bidder whose name appears first in the Bid-cum-Application Form or Revision Form. Floor Price The lower end of the Price Band, below which the Issue Price will not be finalised and below which no Bids will be accepted. Indian GAAP Generally accepted accounting principles in India. Indian National A citizen of India as defined under the Indian Citizenship Act, 1955, as amended, who is not an NRI. Issue The issue of [ ] Equity Shares of Rs. 10 each fully paid up at the Issue Price aggregating Rs. 8, lakhs. iii

6 PYRAMID SAIMIRA THEATRE LIMITED Term Issue/ Bidding Period Issue Price Margin Amount Mutual Funds Net Issue Non Institutional Bidders Non Institutional Portion Pay-in Date Pay-in-Period Price Band Pricing Date Prospectus Public Issue Account QIB Margin Amount Description The period between the Bid / Issue Opening Date and the Bid/Issue Closing Date inclusive of both days and during which prospective Bidders can submit their Bids. The final price at which Equity Shares will be issued and allotted in terms of this Red Herring Prospectus. The Issue Price will be decided by the Company in consultation with the BRLM on the Pricing Date. The amount paid by the Bidder at the time of submission of the Bid, being 10% to 100% of the Bid Amount. Means mutual funds registered with SEBI pursuant to the SEBI (Mutual Funds) Regulations, 1996, as amended from time to time. The issue of Equity Shares other than Equity Shares included in the Promoters Contribution and Employees Reservation. All Bidders that are not Qualified Institutional Buyers or Retail Individual Bidders and who have Bid for Equity Shares for an amount more than Rs. 100,000. The portion of this Issue being at least 15% of the Net Issue consisting of [ ] Equity Shares of Rs. 10 each aggregating Rs. [ ] lakhs, available for allocation to Non Institutional Bidders. Bid/Issue Closing Date or the last date specified in the CAN sent to Bidders receiving allocation who pay less than 100% margin money at the time of bidding, as applicable. Means: (i) with respect to Bidders whose Margin Amount is 100% of the Bid Amount, the period commencing on the Bid/ Issue Opening Date and extending until the Bid/Issue Closing Date; and (ii) with respect to QIBs, whose Margin Amount is 10% of the Bid Amount, the period commencing on the Bid/Issue Opening Date and extending until the closure of the Pay-in Date. The price band of a minimum price ( Floor Price ) of Rs. 88/-and the maximum price ( Cap Price ) of Rs. 100/- and includes revisions thereof. The date on which the Company in consultation with the BRLM finalises the Issue Price. The Prospectus, filed with the Registrar of Companies, Tamil Nadu containing, inter alia, the Issue Price that is determined at the end of the Book Building Process, the size of this Issue and certain other information. Account opened with the Banker to this Issue to receive monies from the Escrow Account for this Issue on the Designated Date. An amount representing at least 10% of the Bid Amount. iv

7 Term QIB Portion Qualified Institutional Buyers or QIBs Red Herring Prospectus / RHP Registrar/ Registrar to this Issue Retail Individual Bidders Retail Portion Revision Form Syndicate Syndicate Agreement Syndicate Member Transaction Registration Slip/ TRS Underwriters Underwriting Agreement Description Consists of [ ] Equity Shares of Rs. 10 each aggregating Rs. [ ] lakhs being up to 50% of the Net Issue, available for allocation to QIBs. Public financial institutions as specified in Section 4A of the Companies Act, scheduled commercial banks, mutual funds registered with SEBI, multilateral and bilateral development financial institutions, venture capital funds registered with SEBI, state industrial development corporations, insurance companies, provident funds with minimum corpus of Rs lakhs and pension funds with minimum corpus of Rs lakhs. For purposes of the Issue, QIBs exclude persons resident outside India, including, without limitation, FIIs, FVCIs, multilateral and bilateral institutions and companies in which there is a majority ownership and control by persons resident outside India. The document issued in accordance with Section 60B of the Companies Act, which does not have complete particulars of the price at which the Equity Shares are offered and the number of equity shares being offered and which has been filed with the ROC on 30/11/2006. Cameo Corporate Services Ltd. Individual Bidders (including HUFs) who have Bid for an amount less than or equal to Rs. 100,000 in any of the bidding options in this Issue. Consists of [ ] Equity Shares of Rs. 10 each aggregating Rs. [ ] lakhs, being at least 35% of the Net Issue, available for allocation to Retail Individual Bidder(s). The form used by the Bidders to modify the quantity of Equity Shares or the Bid price in any of their Bid-cum-Application Forms or any previous Revision Form(s). The BRLM and the Syndicate Members. The agreement to be entered into between the Company and the members of the Syndicate, in relation to the collection of Bids in this Issue. Keynote Capitals Ltd. The slip or document issued by the Syndicate Members to the Bidders as proof of registration of the Bid. The BRLM and the Syndicate Member. The Agreement among the Underwriters and the Company to be entered into on or after the Pricing Date. v

8 PYRAMID SAIMIRA THEATRE LIMITED ABBREVIATIONS Abbreviation AGM AS BSE CAGR CDSL DIP DP EGM EPS FCNR Account FEMA FII FIPB FIs FVCI GIR Number GoI/ Government HUF Full Form Annual General Meeting. Accounting Standards issued by the Institute of Chartered Accountants of India. Bombay Stock Exchange Limited. Compounded Annual Growth Rate. Central Depository Services (India) Limited. The SEBI (Disclosure and Investor Protection) Guidelines 2000, as amended from time to time, including instructions, guidelines and clarifications issued by SEBI from time to time. Depository Participant. Extra Ordinary General Meeting of the shareholders. Earnings per Equity Share. Foreign Currency Non Resident Account. Foreign Exchange Management Act, 1999, as amended from time to time and the regulations issued thereunder. Foreign Institutional Investor (as defined under SEBI (Foreign Institutional Investors) Regulations, 1995, as amended from time to time) registered with SEBI under applicable laws in India. Foreign Investment Promotion Board. Financial Institutions. Foreign Venture Capital Investors registered with SEBI under the SEBI (Foreign Venture Capital Investor) Regulations, FVCIs are not permitted to participate in this Issue. General Index Registry Number. Government of India. Hindu Undivided Family. I. T. Act The Income Tax Act, 1961, as amended from time to time. I. T. Rules The Income Tax Rules, 1962, as amended from time to time, except as stated otherwise. NAV Net Asset Value. NRE Account Non Resident External Account. NRO Account Non Resident Ordinary Account. NSDL National Securities Depository Limited. NSE P/E Ratio PAN RBI National Stock Exchange of India Limited. Price/Earnings Ratio. Permanent Account Number. The Reserve Bank of India. vi

9 Abbreviation RBI Act RoC/Registrar of Companies RoNW Rs./ Rupees SCRA SCRR SEBI SEBI Act Stock Exchanges UIN USD/ $/ US$ Full Form The Reserve Bank of India Act, 1934, as amended from time to time. The Registrar of Companies, Tamil Nadu, Chennai. Return on Net Worth. Indian Rupees, the legal currency of the Republic of India. The Securities Contract (Regulation) Act, 1956, as amended from time to time. The Securities Contracts (Regulation) Rules, 1957, as amended from time to time. The Securities and Exchange Board of India. The Securities and Exchange Board of India Act, 1992, as amended from time to time. BSE and NSE Unique Identification Number issued in terms of SEBI (Central Database of Market Participants) Regulations, 2003, as amended from time to time. The United States Dollar, the legal currency of the United States of America. INDUSTRY RELATED TERMS Company Description BPO Business Process Outsourcing CAG Content Agglomeration CAS Conditional Access System CD Compact Disc DLP Digital Light Processing DRM Digital Rights Management DTH Direct to Home DTS Digital Track Sound GPS Global Positioning System GPRS General Packet Radio Service GSM HD IP ITES MDTC MPEG PDA PLC VSAT Global System of Mobile High Definition Internet Protocol Information Technology Enabled Services Mega Digital Theatre Chain Motion Pictures Exports Group Personal Digital Assistant Program Logic Control Very Small Aperture Terminal Notwithstanding the foregoing, in the chapter titled Main Provisions of the Articles of Association of the Company on page 131 of this Red Herring Prospectus, defined terms have the meaning given to such terms in the Articles of Association of the Company. vii

10 PYRAMID SAIMIRA THEATRE LIMITED PRESENTATION OF FINANCIAL INFORMATION AND USE OF MARKET DATA Unless stated otherwise, the financial information used in this Red Herring Prospectus is derived from the Company s financial statements as of and for the years ended March 31, 2002, 2003, 2004, 2005 and 2006 and for the six month period ended September 30, 2006, prepared in accordance with Indian GAAP and the Companies Act and restated in accordance with SEBI Guidelines, as set forth in the report of our Statutory Auditors, R. Mugunthan Chartered Accountant included in this Red Herring Prospectus. Our fiscal year commences on April 1 and ends on March 31 of a particular year. Unless stated otherwise, references herein to a fiscal year (e.g., fiscal 2005), are to the fiscal year ended March 31 of a particular year. In this Red Herring Prospectus, any discrepancies in any table between the total and the sum of the amounts listed are due to rounding-off. Market data used in this Red Herring Prospectus has been obtained from industry publications and internal Company reports. Industry publications generally state that the information contained in those publications has been obtained from sources believed to be reliable but that their accuracy and completeness are not guaranteed and their reliability cannot be assured. Although we believe market data used in this Red Herring Prospectus is reliable, it has not been independently verified. Similarly, internal Company reports, while believed by us to be reliable, have not been verified by any independent source. viii

11 FORWARD-LOOKING STATEMENTS We have included statements in this Red Herring Prospectus which contain words or phrases such as will, aim, is likely to result, believe, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, project, should, will pursue and similar expressions or variations of such expressions that are forward-looking statements. All forward looking statements are subject to risks, uncertainties and assumptions about us that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Important factors that could cause actual results to differ materially from our expectations include but are not limited to: General economic and business conditions in the markets in which we operate and in the local, regional and national economies; Changes in laws and regulations relating to the industries in which we operate; Increased competition in these industries; Our ability to successfully implement our growth strategy and expansion plans, and to successfully launch and implement various projects and business plans for which funds are being raised through this Issue; Our ability to meet our capital expenditure requirements; successfully implement the strategy, growth and expansion plans Fluctuations in operating costs; Our ability to attract and retain qualified personnel; Changes in technology; Changes in political and social conditions in India or in countries that we may enter, the monetary and interest rate policies of India and other countries, inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices; The performance of the financial markets in India and globally; For a further discussion of factors that could cause our actual results to differ, see the chapters titled Risk Factors Our Business and Management s Discussion and Analysis of Financial Condition and Results of Operations beginning on pages x, 45 and 92 of this Red Herring Prospectus respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been estimated. Neither the Company nor the members of the Syndicate, nor any of their respective affiliates have any obligation to update or otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not come to fruition. In accordance with SEBI requirements, the Company and the BRLM will ensure that the offer document is updated and the investors and public are informed of material changes and developments until such time as the grant of listing and trading permission by the Stock Exchanges. ix

12 PYRAMID SAIMIRA THEATRE LIMITED SECTION II RISK FACTORS RISK FACTORS An investment in Equity Shares involves a high degree of risk. You should carefully consider all of the information in this Red Herring Prospectus, including the risks and uncertainties described below, before making an investment in our Company s Equity Shares. If any of the following risks occur, our business, financial condition and results of operations could suffer, the trading price of our Equity Shares could decline, and you may lose all or part of your investment. A. SPECIFIC TO THE PROJECT 1. Objects of the Issue for which the funds are being raised has not been appraised by any Bank or Financial Institution The total cost of the project is Rs. 11, lakhs. The project has not been appraised by any Bank or Financial Institution. Further, the total project cost comprises of an amount of Rs lakhs towards working capital requirements, which is as per the estimates of the Company and has not been appraised by any Bank. Our project is under implementation and we have already deployed an amount of Rs. 2, lakhs as on 10/11/2006 towards the project as certified by our statutory auditor vide their Sources and Deployment of Funds certificate dated 16/11/2006. The funds received from the issue will be deployed at the sole discretion of the Management. 2. The technology being deployed and used in our project is unique and is not tried and tested Our project involves the digitalization of the process of transmitting and exhibiting films and other audiovisual content across the theatres in our chain. This concept of digital theatres is a relatively new concept worldwide with only a few hundred theatres around the world capable of exhibiting digital content. We propose to use a satellite based distribution mechanism of films which involves conversion of film negatives into digital formats, transmitting the same over broad band satellite network to store in the servers installed in the theatres forming part of our chain for this purpose and exhibiting the film in a digital mode in the theatre. Though respective parts of these technologies have been used by various industries, the wholesome integration of this technology is unique to the project. Given the fact that the technology is new, it is not completely tried and tested. 3. Compared to other formats of film distribution, digital distribution of film content carries unique risks Currently the film industry duplicates of prints and physically delivers the prints to the theatres, which is time tested and proven. We propose to use satellite based technology for the distribution of film and other audio-visual content to the theatres in our chain in digital formats, which will be stored on servers located in each theatre and then exhibited at scheduled times. The digital distribution of films has not been tested elaborately over a long period of time. We could be exposed to risks such as satellite link failures, hardware failure of the servers in our theatres, software failures of the servers in our theatres, delays in conversion of the film negatives into digital formats and other such risks which could lead to delays in distribution of the films and other content to the theatres in our chain. 4. We face the risk of default in reclaiming the refundable lease deposits paid by us to theatre owners A significant portion of the proceeds of the issue are proposed to be utilised for providing refundable lease deposits to theatre owners for theatres that we propose to tie up with as part of our chain. There is a risk of default on part of the theatre owners in returning the refundable lease deposits on the expiry of the lease agreement. In the event that this occurs, it could adversely affect our financial performance. 5. Our inability to deliver as per our business plan could have an adverse impact on our results from operations Our growth plans are considerable and would put significant demands on our management team and other resources. Any delay in implementation could also inhibit our ability to grow. In addition, our expansion in new and existing markets may present distribution challenges that differ from those in our current operations. x

13 These factors could cause diversion of management attention from the expansion plans leading to delays and cost overruns. 6. We compete with other large players in the exhibition industry, some of whom have access to significantly larger financial resources than our company. Our operations in the film exhibition industry compete with those of other established players, some of whom have been in operation for a longer period of time than us. Some of our competitors have access to larger financial resources than our company. There is a risk of our business model being adopted by some of these larger players, in which case, our rate of expansion could slow down if we are unable to tie up with theatre owners and property developers in target locations, before our competition does so. 7. Dependence on the public issue The present project of the company is planned to be funded substantially from the proposed IPO. Any delay in the IPO will adversely impact the implementation of the project. B. SPECIFIC TO THE COMPANY 1. Litigation There is a tax demand for Rs. 82,19,948/- (comprising of Rs.34,04,964/- towards tax and Rs. 43,14,984 towards interest) from Income Tax Department against Mr V.Natarajan, a promoter. With regard to the said tax demand, the H ble High Court on vide Order No.TCMP 2702/2003 has stayed the collection of tax and interest as per the demand order dated pending TC No.211/2003. There is a a tax demand for Rs. 23,83,800/- from Income Tax Department against Mr V.Natarajan in respect of assessment relating to the block period from 01/04/1987 to 17/03/1997. The Honourable High Court of Judicatory at Madras vide Order in TCMP 148/2004 dated 16/06/2004 has stayed the said recovery subject to a payment of Rs lakhs by Mr V.Natarajan which has been paid as per the order. 2. The Company is promoted by first generation entrepreneurs PSTL is promoted by Mr. V. Natarajan, Mr. P. S. Saminathan and Mr. N. Narayanan, who are first generation entrepreneurs and do not have a prominent track record of past ventures. The Mega Digital Theatre Chain Project being their first major venture, could be exposed to consequential risks inherent in such projects. 3. Increase in the prices of the content may impact the profitability of the Company. Content in the context of our operations refers to the ownership of the distribution rights of film and non-film based viewing/screening material. We purchase or take on lease the rights for screening the contents in our theatre chain from the producers / distributors. Any increase in the prices of the content could affect the margins of our company. 4. Any decline in the number of films produced in a year could affect the profitability of our company The business of the company is largely dependent on the number of films released in the year. Any slowdown in the film production could impact the revenues of the company. Further success of the exhibition business depends on the commercial success of various films. 5. The shelf life of movies has gone down significantly over a period of time, and as such, the average run rate and collections per movie has declined. The film industry in the country has witnessed a boom in the number of films being produced per annum over the past decade. With increasing corporatisation of the film industry and easier access to legitimate means of financing production of films, even small and new production houses have access to the resources required to produce and release films. The increasing incidence of piracy of films also means that film audiences have alternate means of access to the latest films besides theatres and multiplexes. Thus with wider choices of films being available now as compared to the past years and easier access to latest films, very few films enjoy the extended run rates compared to releases in the past. As film exhibitors, we have to ensure that we have regular and steady access to the latest films in order to ensure maximum possible seat occupancy rates per show. In the event that we are unable to obtain exhibition rights for the latest releases, the attendance in the theatres in our chain could decline, leading to loss of revenue for our company. xi

14 PYRAMID SAIMIRA THEATRE LIMITED 6. Our operations being currently centred in and around Tamil speaking regions, our business at present is exposed to the risks inherent in the Tamil film industry Out of 148 screens in our chain, 110 screens are located in Tamil Nadu. As of now we predominantly exhibit Tamil language films with a comparatively lower number of Hindi and English films being screened. Thus our market is currently restricted to the Tamil speaking market and is not completely diversified. Although we have signed agreements for expansion of our theatre chain in other parts of the country, these screens will become operational only in the next months. 7. Changes in technology may impact our business by making our business model less competitive Advancement in technology may require us to make additional capital expenditure for upgrading our systems or may make our competitors more competitive. If we are not able to respond to such technological advancement well in time, we may loose our competitiveness. 8. Our success depends largely on our senior management and our ability to attract and retain our key personnel. Our comppany s current operations are largely dependent on the skills and abilities of our promoters nd executive directors. We have divided the territorywise functional responsibilites of our operations among our senior management personnel. The functional responsibilities include theatre management, content procurement, technical services, financial management and the like. Our success depends on the continued services and performance of the members of our management team and other key employees. The loss of the services of our Promoters and key personnel could seriously impair our ability to continue to manage and expand our business. Further, the loss of any other member of our senior management or other key personnel may adversely affect our operations and financial condition. 7. Leased premises The company is currently operating out of leased premises. The company s registered office is situated at C-1, II Floor, Temple Towers, 672, Anna Salai, Nandanam, Chennai , whih have been rented vide the lease agreement dated 04/12/2004. The lease is for a period of three years. The lease agreement has not been registered. 8. Pending licenses and approvals The company has applied for license under the Tamil Nadu Shops and Establishment Act and the same is awaited. 9. We have entered into a Shareholders Agreement with Bennet Coleman & Co. Ltd. We have entered into a Shareholders Agreement with Bennet, Coleman & Co. Ltd. [ BCCL ] dated 31/05/ 2006, wherein BCCL agreed to subscribe to 5,00,000 equity shares of Rs. 10/- each of our company at a price of Rs. 80/- per equity share aggregating Rs lakhs. The allotment of the aforesaid equity shares has been made by us on 03/06/2006. We have also entered into an advertising agreement dated 31/05/2006, with BCCL wherein we have agreed to place advertisements of our products, services and brands amounting to Rs lakhs in print publications and non-print media of BCCL. 10. We had filed a draft prospectus for an initial public offering of our company in the month of June 2005 which was subsequently withdrawn in the month of November 2005 We had filed a draft prospectus with SEBI, BSE and NSE on 17/06/2005 for an initial public offering of 2,45,00,000 equity shares of Rs.10/- each at par aggregating Rs.2, lakhs. We had subsequently withdrawn the prospectus on 21/11/2005 as we had raised the required resources through private placement from various individuals and corporates. We employed the resources so raised in the implementation of the project and currently have 148 screens and have tied-up for more screens across the country, to be part of our Mega Digital Theatre Chain. Based on this implementation and our current and future expansion plans, we filed the Red Herring Prospectus on 31/07/2006 to raise resources to fund our plans. xii

15 11. There are no standard valuation methodologies or accounting practices in the media and related industries. The financials of the issuer are not comparable with the players in the industry 12. Valuations in the media industry are presently high and may not be sustained in future and may also not be reflective of future valuations for the industry. 13. We have commenced the business of distribution and exhibition of films from November 2005, and this segment has been contributing to our revenues only from this period onwards. Our company was originally engaged in the business of production of films. Our management took a strategic decision to cease the business of film production and focus on the film distribution and exhibition industry. As such, our new line of business has been contributing to our revenues only from November C. EXTERNAL RISK FACTORS 1. Risk of box-office flops leading to low ticket collections Exhibitors are not in a position to judge the commercial success of a film prior to its release for public viewing. Exhibitors expect to have attendance/seat utilization rates which will enable them to recoup the cost of screening the film over the film s run time. A flop will have an adverse impact on the per show collection figures for the exhibitor. 2. Piracy and home-viewing may reduce the profit potential. Piracy is a major setback to industry, whether it is through illegitimate cable telecasts or in the form of distribution through various media such as compact discs, digital versatile discs, internet file sharing and others and it is estimated that 20% of the revenues is lost due to piracy. Lack of stringent piracy laws may jeopardize the industry s revenue. 3. The success of our business model is dependent on the viewers tastes for watching films in theatres We operate in the film exhibition business which is dependent on the viewers tastes for visiting theatres to watch films. With increasing adoption of large screen televisions, home theatre systems and DVD players, viewers have alternate means for viewing films. As such, if the viewers tastes and preferences for watching films in theatres change, the performance of our company will be adversely affected. 4. High entertainment tax could affect the growth of the industry The major impediment to the industry is the high rate of entertainment tax levied by the respective state government. For instance, in Bihar the tax rate was 110% of the basic admission rates, in Delhi, it ranges from 40% to 60% on basic admission rates. In West Bengal, the rates are classified as per the language of the movie, say, 70% for Hindi films and 20% for Bengali films. In Tamil Nadu, the Entertainment Tax rate is 15% in A class and 10% in B & C class Towns. Such levies and the revisions thereof would affect the revenues and profitability of the industry and consequently its growth. 5. A slowdown in economic growth in India could cause our business to suffer. The Indian economy has shown sustained growth over the last few years with gross domestic products ( GDP ) growing at 7.5% in last three years. GDP growth for fiscal 2006 is expected to be 8.1% with manufacturing growing at 9.4% and agriculture bouncing back to 2.6% with all sectors doing well (FM s budget speech 2006). Inflation forecast for fiscal 2006 is about 5.0% to 5.5%. However, any slowdown in the Indian economy could reduce spending by our customers and adversely affect our financial performance. 6. There are no key regulations in the industry in which we operate and change in the regulatory environment could adversely affect our performance Film exhibition is an unregulated industry with no particular key regulation governing its working and operations. In the event that there is any change in the regulatory environment which curtails or modifies our operational status, our performance could be adversely affected. 7. A significant change in the Government of India s economic liberalization and deregulation policies could disrupt our business and cause the price of our Equity Shares to decline. Our assets and customers are predominantly located in India. The Government has traditionally exercised and continues to exercise a dominant influence over many aspects of the economy. Its economic policies xiii

16 PYRAMID SAIMIRA THEATRE LIMITED have had and could continue to have a significant effect on private sector entities and on market conditions and prices of Indian securities, including the Equity Shares. The present government, which was formed after the Indian parliamentary elections in April-May 2004, is headed by the Indian National Congress and is a coalition of several political parties. Any significant change in the government s policies or any political instability in India could adversely affect business and economic conditions in India and could also adversely affect our business, our future financial performance and consequently the market price of our Equity Shares. 8. After this Issue, the price of our Equity Shares may be volatile, or an active trading market for our Equity Shares may not develop. Prior to this Issue, there has been no public market for our Equity Shares. The trading price of our Equity Shares may fluctuate after this Issue due to a variety of factors, including results of our operations and the performance of our business, competitive conditions, general economic, political and social factors, volatility in the Indian and global securities markets, trends in general business and entertainment industry, the performance of the Indian and global economy and significant developments in India s fiscal regime. There can be no assurance that an active trading market for our Equity Shares will develop or be sustained after this Issue, or that the price at which our Equity Shares are initially issued will correspond to the prices at which they will trade in the market subsequent to this Issue. Notes to Risk Factors 1. The Company had changed its name from Pyramid Entertainment Ltd. To Pyramid Saimira Theatre Ltd. w.e.f. 23/08/ Public Issue of [ ] Equity Shares of face value of Rs. 10 each at a price of Rs. [ ] for cash aggregating Rs. 8, lakhs including Promoters Contribution of [ ] Equity Shares of face value of Rs. 10/- each at a price Rs. [ ] for cash aggregating Rs. [ ] lakhs and Employee Reservation of [ ] Equity Shares of face value of Rs. 10/- each at a price of Rs. [ ] for cash aggregating Rs. [ ] lakhs 3. The net worth of our Company, as per our restated financial statements as at 30/09/2006 is Rs. 3, lakhs 4. The average cost of acquisition of Equity Shares by our Promoters, is Rs /- per Equity Share. 5. Book value of the Equity Shares of the Company, as per our restated financial statements as at 30/09/2006 is Rs per Equity Share. 6. There have been transactions in the securities of the Company, during the preceding six months, detals of which have been disclosed on page 18 of this Red Herring Prospectus. 7. For details on Related Party Transactions refer to the chapter titled Related Party Transactions on page 78 of this Red Herring Prospectus. 8. Investors are free to contact the BRLM, Co-BRLM for any complaints/ information/ clarification pertaining to this Issue. For contact details of the BRLM and Co-BRLM, please refer to the cover page of this Red Herring Prospectus. 9. All information shall be made available by the BRLM, Co-BRLM and the Company to the public and investors at large and no selective or additional information would be available only to a section of the investors in any manner whatsoever. 10. Investors are advised to refer to the paragraph on Basis of Issue Price on page 29 of this Red Herring Prospectus before making an investment in this Issue. 11. The Issue is being made through a 100% Book Building Process wherein up to 50% of the Net Issue will be allotted on a proportionate basis to QIBs, of which 5% shall be reserved for Mutual Funds. Further, at least 15% of the Net Issue will be available for allocation on a proportionate basis to Non-Institutional Bidders and not less than 35% of the Net Issue will be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above the Issue Price. 12. In the event of the Issue being oversubscribed, the allocation shall be on a proportionate basis to QIBs, Retail Individual Bidders and Non-Institutional Bidders. For details, refer to the chapter titled Issue Procedure on page 112 of this Red Herring Prospectus. xiv

17 1. SECTION III: INTRODUCTION SUMMARY This is only a summary and does not contain all the information that you should consider before investing in our Equity Shares. You should read the entire Red Herring Prospectus, including the information contained in the chapters titled Risk Factors and Financial Statements and related notes beginning on pages x and 80 of this Red Herring Prospectus before deciding to invest in our Equity Shares. INDUSTRY OVERVIEW Entertainment is always seen as a major source for leisure, relaxation and information and improved living standard translates into higher needs for leisure and entertainment. It is also an established fact that entertainment is generally recession proof. The Indian Entertainment industry primarily consisting of film software, distribution and exhibition, television software and broadcasting, music and radio is one of India s oldest and prominent industries. Indian Entertainment & Media industry s total revenue pie is estimated to grow at a Compounded Annual Growth Rate (CAGR) of 19% to be worth Rs.83,740 crore by The current size of the industry is about Rs.35,300 crore. The industry is estimated to out perform the country s GDP growth each year till 2010 according to the 2005 annual edition of FICCI Price Waterhouse Coopers report on the Indian E & M industry. The study attributes this to economic growth, rising income levels, consumerism, coupled with technological advancements and policy initiatives taken by the government, that encourage inflow of investments into this sector. The Indian Film industry is the largest film industry in the world in terms of no. of films produced and admissions each year. Film entertainment sector is expected to get more corporatised and is projected to grow at 18% to become a Rs.15,300 crore industry by 2010 from the current level of Rs.6,800 crores. The growth is expected to be driven by technology advancements in films production, exhibition and marketing. The film industry comprises of three sectors Movie production, which involves making of movies; Movie distribution, which involves distribution of movies to theatres, television and video stores; and Movie exhibition, which involves exhibiting of movies in theatres. Over the last 5-7 years, factors such as strong economic growth, falling interest rates, increased interest in real estate development, increased consumption levels, etc. have resulted in a large boom in the Organized Retail sector in India. A number of large organized retail outlets have been trying to attract large footfalls by building attractive properties to have branded food and apparel outlets as well as theatre chains. Emergence of tier 2 and tier 3 cities in India holds a huge potential in the organized film exhibition industry and the organized retail industry. It is estimated that by , India will have 910 lakh high consuming households, 740 lakh climbers and 150 lakh aspirant households, which will fuel the demand for entertainment. Further nearly two thirds of India s population is below the age of 35 making it one of the youngest nations in the world on the feasible basis. The exhibition industry in India presently has about 13,000 cinema screens with 13 screens per million heads of population, the lowest screen average in the world. A combination of highly fragmented ownership, high entertainment tax rates, large cost of setting up new theatres, and unavailability of organized funding has resulted in many such theatres not being able to continuously upgrade or renovate their facilities, thus resulting in a decline in the quality of such theatres. With around 12,900 active screens, over 95% are standalone single screens. In contrast, China, which produces far less films than India, has 65,000 screens while US has 36,000. There is a need for at least 20,000 screens in India as against the current 12,900. (Source: CII-KPMG Report, 2005). Theatres constitute last mile delivery for films. Excepting a few theatres in cities, majority of the theatres suffer from low occupancy levels and poor quality infrastructure. Currently theatres are owned individually, as well as managed on stand-alone basis. The combination of highly fragmented ownership, unavailability of organized funding, inability to get good films at optimal cost, have resulted in decline in the quality of services and lack of inclination of single screen owners to invest in infrastructure, projection system, etc. Further, globally, there has been a momentum away from single screen theatres towards chains and multiplexes. The growth opportunity of multiplexes are: 1

18 PYRAMID SAIMIRA THEATRE LIMITED (a) Physical incentives by various Government, (b) High quality of experience offered, (c) Multiple chances to the customer, and (d) Better exploitation of films It is herein the agglomeration of the single screen into an integrated theatre chain holds significance as it will negate the investment barrier / knowledge barrier / negotiation barrier present in the current individual owned and individually managed single screen theatres. Cinema industry also has undergone a change in culture & taste. Today no film can dream of 300 day run. The shelf life per film has drastically come down. If the film is good then, unfortunately, the piracy market makes sure that it is available for viewing across the entire geography within a very short period from the date of release. If the film is bad, anyway no body will come to theatres to watch it. Therefore piracy is a lose-lose situation. Herein comes the basic logic of converting theatres into digital exhibition medium and connecting it through satellite based networking. By this method, a new film can be released across many locations without variable cost of prints and make the new content available on the release day, in many locations, thereby solving supply issue of the content at the right time. Non-availability of new content on the release day, at their respective nearby places, is one of the major reasons for rampant piracy of films. The release of film in many locations simultaneously, reduces risk of box office failure and also reduces piracy. This move will also in one stroke bring multiple content to theatres and theatres will no longer be just film exhibition centers but a place where gamut of entertainment & education can be served. COMPANY OVERVIEW Our Company was incorporated on 20/06/1997 as Pyramid Films International Pvt Ltd. Our Company was then engaged in production of Tamil feature films and releasing them on various modes including theatres. The recent change in name is to reflect current thrust of our company in film distribution and exhibition sector. Our Company was promoted by Mr. V. Natarajan in the year Before promoting our company, Mr.V.Natarajan had produced number of films and he has 30 years of experience and domain expertise in entertainment sector. He is a veteran in the film industry and has so far been invovled in 55 films in various capacities such as Executive Director, Executive Producer and Producer. Mr. P. S. Saminathan and Mr. N. Narayanan have joined Mr. V. Natarajan as promoters of our Company to facilitate the implementation of our Mega Digital Theatre Chain Project. Mr. P. S. Saminathan has more than 18 years of domain expertise in techno-commercial ventures including stints at M/s. Value Added Funds Management Ltd., a private equity fund, M/s. Jupiter Trades, a cable TV Multi System Operator in Chennai and M/s. Aquastride, a consultancy organization in the field of bio-science. Mr. N. Narayanan has more than 20 years experience in man management in large organizations such as Enfield India Ltd. and Ashok Leyland Ltd., both automobile manufacturers, Our company is adequately represented by professionals in the Board and the advisory panel has representation from cross section of the media and management in the entertainment industry. THE PROJECT We are in the process of forming the largest chain of theatres in India. We have christened this project as the Mega Digital Theatre Chain project. The key elements of this concept are: separation of ownership and management Theatre owners will hand over management of their theatres to professional organizations like our company consolidation of last mile delivery platform will create a level playing field between content and reach by building an efficient and cost effective content supply chain. significant reduction in distribution cost due to digital exhibition combined with satellite distribution. This will enable simultaneous release of films across all locations without extra film print cost and will eliminate the quality divide between the metros and non-metros. transparency in the collection process will create a bankable structured revenue stream to the industry. Digital Cinema is not about replacing an ordinary Projector with a Digital Projector. It implies a change in the relationship and structure of the exhibition industry as a whole. 2

19 The project entails taking existing theatres on long term leases and installing digital exhibition systems such as digital projectors and digital audio equipment. These theatres will be connected through a satellite based communication system, which will enable the distribution of content from a central location such as our Network Operating Centre [ NOC ]. This process will convert existing theatres into a digital exhibition venues whereby apart from new films, other content including educational films, sports programmes and television channels can be exhibited in theatres. We plan to remove existing dis-incentives in theatres and upgrade them to offer a high quality viewing experience with modern amenities. The project will create several service pulls inside theatres exploiting the space and locational advantage of existing theatres. On completion of the digitalization of theatres, a new film can be released across many locations without variable cost of prints and new content can be made available on the release day itself, in multiple locations simultaneously, thereby resolving the issue of access to new content at the right time. Non-availability of new content on the release day, at their convenient locations, is one of the major reasons why people resort to piracy of films. The release of film in many locations simultaneously, reduces risk of box-office failure of the film and reduces piracy. Recognizing the current reality of low shelf life of films, we plan to release a new film once in days (average) in our chain. Our company has already tied up with reputed technical service providers and vendors: Name Service / Product Value Media Private Ltd. Comprehensice Digital Cinema Solutions including Projectors, Servers and other Digital Cinema Equipment on pay-per-use basis Tatanet Ltd. Communications technology (VSAT) Prasad Corporation Pvt. Ltd. Digital Conversion of content Real Image Technologies Pvt. Ltd. Servers and software solutions Bharat Digital Ltd. Supply of customized digital projectors In addition to the above, we have tied up with M/s. Spirit Global Constructions Pvt. Ltd. for the provision of screens in the states of Punjab and Himachal Pradesh. We have also tied up with M/s. Swatantra Land & Finance Pvt. Ltd. for 22 malls in the state of Haryana and 20 malls in the state of Rajasthan. For further details on the above arrangement, please refer to page 46 of this Red Herring Prospectus. The concept of releasing a film across many locations and exhibiting them in a high quality digital theatre is unique and ripe considering communication & technological advancements in the recent past. Our Company has the First Mover Advantage and we plan to expand our operations on a national level as well as take our project to countries in South Asia. Our Company will also position itself as a leading service provider in the entertainment sector across South East Asia. We aim to carve a unique place in the market for mass-access medium, using theatre infrastructure to deliver education, entertainment and information at an affordable price to all sections of the society. In addition, our chain will also be developed as a platform for a retail business. Competitive Strengths Single largest theatre chain company in India Our company is the single largest theatre chain company in India, present in all categories of exhibition center like malled multiplexes, multiplexes and single screen theatres across various cities and smaller towns. As on the date of this Red Herring Prospectus, our chain currently consists of 148 screens across cities and towns in Tamil Nadu, Andhra Pradesh and Karnataka. Multi segment presence Traditionally film industry is segregated into three sectors: a) Production Sector b) Distribution Sector c) Exhibition Sector. 3

20 PYRAMID SAIMIRA THEATRE LIMITED Exhibition Sector is further classified into the following: Class A Locations - Locations in which all new films will be released. Class B Locations - Locations in which all new films will be shifted from the Class A Locations. Multiplexes are usually set up and operated in Class A locations. Our Company is present in all locational segments of the exhibition sector i.e. Multiplexes, Class A and Class B locations. Our Company also acts as a distributor of films where in addition to being the exhibitor, we take on the physical as well as business role distributing the film to various exhibitors, thereby moving a tep up in the value chain. Strong presence in Tamil film exhibition Out of our current network of 148 screens, 110 screens are situated in Tamil Nadu. We have received support from 12 reputed Tamil film production houses. In addition we have been able to consistently secure distribution and exhibition rights to major new Tamil film releases in major regions like Coimbatore, Madurai, Salem, among others. Our chairman, Mr. V. Natarajan has a long history in the Tamil film industry having worked as an actor, director and producer on several films. These factors combined, have given us a good base to build up a strong presence in the Tamil film exhibition sector. 4

21 SUMMARY FINANCIAL DATA The following tables set forth selected financial information of our Company derived from its audited financial statements for the respective periods and as described in the auditor s report included in the section titled Financial Statements on page 80 of this Red Herring Prospectus and should be read in conjunction with those financial statements and the notes thereto. SUMMARY OF PROFIT AND LOSS ACCOUNT Rupees in Lakhs 31/03/ /03/ /03/ /03/ /03/ /09/2006 Income Sales a. Films/Serial Produced by the Company b. Films /Serial rights distributed & Exhibited c. Total Other Income Grand Total Expenditure Cost of Pictures/ Rights Serial & Films Cost of Export Rights & Expenses Expenses of Exhibition at Theatres Selling, Dist. & Admin Expenses Deferred Revenue Expenses Interest, Depreciation & others Grand Total Profit before Tax & Extraordinary items Taxation IT, MAT & Fringe Benefit Deferred Tax Liabilities Deferred Tax (Assets) (48.59) Net Profit before Extraordinary items Extra-ordinary items (Net of Tax) Net Profit after Extraordinary items Distributable profits Deferred tax assets were not considered while arriving at Distributable profit 5

22 PYRAMID SAIMIRA THEATRE LIMITED SUMMARY OF ASSETS AND LIABILITIES AS RESTATED Rupees in Lakhs 31/03/ /03/ /03/ /03/ /03/ /09/2006 A. FIXED ASSETS: Gross Block LESS:Depriciation Net Block Capital work-in-progress Net Fixed Assets (a) B. Current Assets, Loans and Advances: Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Other Current Assets Total Current Assets (b) , Less:Current Liabilities (c) and Provisions Net Current Tangible assets (b-c) (d) , Deferred Revenue Expenditure C. Secured and secured loans Secured Loans Unsecured Loans TOTAL LOANS (e) D. Networth represented by: 1.(a)Share Capital , (b) Share Application Pending Allotment Reserves (a) Profit and Loss Account (b) Securities Premium Deferred Tax Liability/(Assets) (47.81) (47.81) NETWORTH (f) , NET TANGIBLE ASSETS (a+d) (g) ,

23 THE ISSUE Equity Shares Offered: Issue by the Company [ ] Equity Shares aggregating Rs. 8, akhs. Of which Promoters Contribution [ ] Equity Shares aggregating Rs. [ ] lakhs. [ ] Employees Reservation Portion (1) Equity Shares aggregating Rs. [ ] lakhs. Net Issue to the Public [ ] Equity Shares aggregating Rs. [ ] lakhs. Of which A) Qualified Institutional Buyers Portion (2) - [ ] Equity Shares aggregating Rs. [ ] lakhs, constituting up to 50% of the Net Issue. [ ] Of which 5% is available for allocation Equity Shares aggregating Rs. [ ] lakhs to Mutual Funds B) Non-Institutional Portion (2) [ ] Equity Shares aggregating Rs. [ ] lakhs, constituting at least 15% of the Net Issue that will be available for allocation to Non-Institutional Bidders. C) Retail Portion (2) [ ] Equity Shares aggregating Rs. [ ] lakhs constituting not less than 35% of the Net Issue that will be available for allocation to Retail Individual Bidders. Equity Shares outstanding prior to the Issue 1,98,25,000 Equity Shares Equity Shares outstanding after the Issue [ ] Equity Shares Use of Proceeds Please refer to chapter titled Objects of the Issue on page 23 of this Red Herring Prospectus for additional information. (1) Under-subscription, if any, in the Employee Reservation Portion will be added back to the Net Issue and the proportionate allocation of the same would be at the sole discretion of the Company in consultation with the BRLM. (2) Under-subscription, if any, in any of the above categories would be allowed to be met with spillover inter-se from any other categories, at the sole discretion of the Company and BRLM. 7

24 PYRAMID SAIMIRA THEATRE LIMITED GENERAL INFORMATION Registered Office of Our Company C-1, II Floor, Temple Towers, # 672 Anna Salai, Nandanam, Chennai Ph: Fax: Mail: pstl@pstl.in Web: Registration Number: Our Company is registered with the Registrar of Companies, Tamil Nadu situated at Block No. 6, B-Wing, 2 nd Floor, Shastri Bhawan 26, Haddows Road, Chennai Board of Directors Our current Board of Directors consists of the following: Sr. No. Name Designation Status 1. Mr.V.Natarajan Chairman Non Independent and Executive 2. Mr.P.S.Saminathan Managing Director Non Independent and Executive 3. Mr.N.Narayanan Whole-time Director Non Independent and Executive 4. Dr.S.Ramani Independent Director Independent and Non-Executive 5. Mr.K.Natarahjan Independent Director Independent and Non- Executive 6. Mr.K.S.Kasiraman Independent Director Independent and Non-Executive 7. Mr. Nirmal Kotecha Director Non Independent and Non-Executive 8. Mr. M. S. Narasimhan Director Independent and Non-Executive For further details of our Board of Directors, please refer to the chapter titled Our Management on page 69 of this Red Herring Prospectus. COMPANY SECRETARY AND COMPLIANCE OFFICER Mr. R. Manthramurthy, C-1, II Floor, Temple Towers, # 672 Anna Salai, Nandanam, Chennai Tel: (044) Fax: (044) pstl@pstl.in REGISTRAR TO THIS ISSUE CAMEO CORPORATE SERVICES LIMITED Subramanian Building, No.1, Club House Road, Chennai Tel.: Fax : cameo@cameoindia.com Sebi Regn. No.:INR Website: Contact Person: Mr. R. D. Ramasamy Investors can contact the Compliance Officer or the Registrar in case of any pre-issue or post-issue related problems such as non-receipt of letters of allocation, credit of allotted Equity Shares in the respective beneficiary account or refund orders, etc. 8

25 BOOK RUNNING LEAD MANAGER (BRLM) KEYNOTE CORPORATE SERVICES LIMITED 307, Regent Chambers, Nariman Point, Mumbai Tel: , Fax: Website: Contact Person: Mr. Vikram Subramaniam CO-BOOK RUNNING LEAD MANAGER (CO-BRLM) CANARA BANK Merchant Banking Division Circle Office 563/1, Anna Salai Teynampet Chennai Phone : Fax : pstl-ipo@canbank.co.in Contact Person : Mr. R.Anantharamakrishnan STATEMENT OF INTER SE ALLOCATION OF RESPONSIBILITIES FOR THE ISSUE The following table sets forth the distribution of responsibility and coordination for various activities among the BRLM and Co-BRLM: No. Activities Responsibility Coordinator 1. Capital Structuring with relative components and formalities such as type KEYNOTE KEYNOTE of instruments, etc. 2. Due diligence of Company s operations/ management/business KEYNOTE KEYNOTE plans/legal etc. 3. Drafting and design of Red Herring Prospectus and of statutory KEYNOTE KEYNOTE advertisement including memorandum containing salient features of the Prospectus. The BRLMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, Registrar of Companies and SEBI including finalisation of Prospectus and ROC filing. 4. Drafting and approval of Issue and statutory publicity material, etc. KEYNOTE KEYNOTE CANBANK 5. Drafting and approval of all corporate advertisement, brochure and KEYNOTE KEYNOTE other publicity material CANBANK 6. Appointment of Ad Agency and Printers KEYNOTE KEYNOTE 7. Appointment of Registrar and Bankers KEYNOTE KEYNOTE CANBANK 8. Marketing of the Issue, which will cover inter alia, KEYNOTE, Formulating marketing strategies, preparation of publicity budget CANBANK KEYNOTE Finalise Media and PR strategy Finalising centers for holding conferences for brokers, etc. Finalise collection centres 9

26 PYRAMID SAIMIRA THEATRE LIMITED No. Activities Responsibility Coordinator Follow up on distribution of publicity and Issue material including form, prospectus and deciding on the quantum of the Issue material 9. Finalisation of Pricing in consultation with the company KEYNOTE, CANBANK KEYNOTE 10. Post bidding activities including management of Escrow Accounts, CANBANK CANBANK co-ordination with the Registrars and Banks, Refund to Bidders, etc. 11. The post-offer activities for the Offer involving essential follow up steps, CANBANK CANBANK which must include finalisation of listing of instruments and dispatch of certificates and refunds, with the various agencies connected with the work such as Registrars to the Issue, Bankers to the Issue and the bank handling refunds business. BRLMs shall be responsible for ensuring that these agencies fulfill their functions and enable him to discharge this responsibility through suitable agreements with the Company. LEGAL ADVISORS TO THE ISSUE CORPORATE LAW CHAMBERS INDIA Advocates 44A, Nariman Bhavan, Nariman Point, Mumbai Tel: /29 Fax: SYNDICATE MEMBER Keynote Capitals Limited 301, Regent Chambers, Nariman Point, Mumbai Tel: Fax: Contact Person: Mr. Alpesh Mehta BANKERS TO THE ISSUE AND ESCROW COLLECTION BANKS HDFC Bank Ltd. The Hongkong and Shanghai Banking Corporation Ltd. Trade World, A Wing, 2 nd Floor, 52/60, Mahatma Gandhi Road, Kamala Mills Compound, Mumbai Senapati Bapat Marg, Tel: Lower Parel, Mumbai Fax: Tel: zedsisirani@hsbc.co.in Fax: kripa.kalro@hdfcbank.com Canara Bank Kotak Mahindra Bank Capital Market Service Branch, 5-C/II Mittal Court,224, 11, Homji Street, Varma Chambers, Nariman Point, Mumbai Grounnd Floor, Fort, Tel: Mumbai Fax: Tel: Fax: mcity2422@canbank.co.in 10

27 Standard Chartered Bank ICICI Bank Ltd. 270, D. N. Road, Capital Markets Division Mumbai , Mumbai Samachar Marg, Tel: Fort Mumbai Fax: Tel: rajesh.malwade@in.standardchartered.com Fax: sidhartha.routray@icicibank.com STATUTORY AUDITORS Mr.R.Mugunthan, Chartered Accountant, Vanjula, New No.23, Arisikkara Street, Mylapore, Chennai Tel. No.: Fax No.: mugunth@gmail.com BANKERS TO THE COMPANY ICICI BANK LTD. INDIAN BANK HDFC BANK Nungambakkam,Chennai Abhiramapuram Branch T. Nagar Branch Tel : / 8004 Chennai Chennai Fax: Tel : Tel : Fax: TAMILNAD MERCANTILE BANK UTI BANK No.194, Anna Pillai Street, Ashok Nagar Branch George Town, 1 st Floor, Chennai Chennai Tel : Tel : Fax: Fax: CREDIT RATING As this is an Issue of Equity Shares there is no credit rating for this Issue. IPO GRADING We have not opted for the grading of this Initial Public Offering. TRUSTEES As this is an Issue of Equity Shares, the appointment of Trustees is not required. MONITORING AGENCY CANARA BANK Mount Road Branch, , Rayala Towers, Anna Salai, Chennai Tel: Fax: chn0911@canbank.co.in Contact Person: Mr. G. V. Reddy 11

28 PYRAMID SAIMIRA THEATRE LIMITED Book Building Process Book Building refers to the process of collection of bids from investors on the basis of this Red Herring Prospectus. The Issue Price is fixed after the Bid/Issue Closing Date. The principal parties involved in the Book Building Process are: (1) Our Company (2) Book Running Lead Manager, in this case, Keynote Corporate Services Limited (3) Co Book Running Lead Manager, in this case, Canara Bank (4) Syndicate Members who are intermediaries registered with SEBI or registered as brokers with BSE/NSE and eligible to act as underwriters, in this case being Keynote Capitals Ltd. (5) Registrar to the Issue, in this case Cameo Corporate Services Limited. SEBI, through its guidelines, has permitted the Issue of securities to the public through the 100% Book Building Process, wherein up to 50% of the Net Issue shall be allotted on a proportionate basis to QIBs, of which 5% shall be reserved for Mutual Funds. Undersubscription, if any, in the QIB portion will be allocated to the other categories. Further, at least 15% of the Net Issue shall be available for allocation on a proportionate basis to Non Institutional Bidders and at least 35% of the Net Issue shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid Bids being received at or above the Issue Price. The Company will comply with these guidelines for this Issue. In this regard, the Company has appointed the BRLM to procure subscriptions to the Issue. QIBs are not allowed to withdraw their Bid after the Bid/ Issue Closing Date and are now required to pay 10% Margin Amount upon submission of their Bid. For details see the chapter titled Terms of the Issue on page 108 in this Red Herring Prospectus. Steps to be taken by the Bidders for bidding: Check whether he/ she is eligible for bidding; Bidder necessarily needs to have a demat account; Ensure that the Bid-cum-Application Form is duly completed as per instructions given in this Red Herring Prospectus and in the Bid-cum-Application Form; and Ensure that the Bid-cum-Application Form is accompanied by the Permanent Account Number or by Form 60 or Form 61 as may be applicable together with necessary documents providing proof of address. For details please refer to the chapter titled Issue Procedure on page 111 of this Red Herring Prospectus. Bidders are specifically requested not to submit their General Index Register number instead of the Permanent Account Number as the Bid is liable to be rejected. Illustration of Book Building and Price Discovery Process (Investors should note that the following is solely for the purpose of illustration and is not specific to this Issue) Bidders can bid at any price within the price band. For instance, assuming a price band of Rs. 20 to Rs. 24 per share, issue size of 3,000 equity shares and receipt of five bids from bidders details of which are shown in the table below. A graphical representation of the consolidated demand and price would be made available at the website of the BSE ( and NSE ( during the bidding period. The illustrative book as shown below shows the demand for the shares of our Company at various prices and is collated from bids from various investors. Number of equity Bid Price (Rs.) Cumulative equity Subscription shares Bid for shares Bid for % % % % 12

29 The price discovery is a function of demand at various prices. The highest price at which the issuer is able to issue the desired quantum of shares is the price at which the book cuts off i.e., Rs. 21 in the above example. The issuer, in consultation with the BRLM will finalise the issue price at or below such cut off price i.e. at or below Rs. 21. All bids at or above this issue price and cut-off bids are valid bids and are considered for allocation in respective category. While the process of Book Building under SEBI Guidelines is not new, investors are advised to make their own judgment about investment through this process prior to making a Bid or Application in the Issue. Underwriting Agreement After the determination of the Issue Price but prior to filing of the Prospectus with Registrar of Companies, Tamil Nadu, we will enter into an Underwriting Agreement with the Underwriters for the Equity Shares proposed to be issued through this Issue. It is proposed that pursuant to the terms of the Underwriting Agreement, the BRLM shall be responsible for bringing in the amount devolved in the event that the Syndicate Members do not fulfill their underwriting obligations. Pursuant to the terms of the Underwriting Agreement, the obligations of the Underwriters are several and not joint, and are subject to certain conditions as specified in such agreement. The Underwriters have indicated their intention to underwrite the following number of Equity Shares: (This portion has been intentionally left blank and will be filled in before filing of the Prospectus with Registrar of Companies, Tamil Nadu) Name and Address of the Underwriters Indicated Number of Amount Underwritten Equity Shares to be (Rs. lakhs) Underwritten Keynote Corporate Services Ltd. [ ] [ ] 307, Regent Chambers, Nariman Point,Mumbai Keynote Capitals Limited [ ] [ ] 301, Regent Chambers, Nariman Point,Mumbai Total [ ] [ ] The above-mentioned amount is an indicative underwriting and would be finalised after pricing and actual allocation. The above underwriting agreement is dated [ ]. In the opinion of the Board of Directors of the Company (based on a certificate given by the Underwriters), the resources of all the above mentioned Underwriters are sufficient to enable them to discharge their respective underwriting obligations in full. All the above-mentioned Underwriters are registered with SEBI under Section 12(1) of the SEBI Act. Allocation among Underwriters may not necessarily be in proportion to their underwriting commitments. Notwithstanding the above table, the BRLM and the Syndicate Members shall be severally responsible for ensuring payment with respect to Equity Shares allocated to investors procured by them. In the event of any default, the respective underwriter in addition to other obligations to be defined in the Underwriting Agreement, will also be required to procure/subscribe to the extent of the defaulted amount. For further details about allocation please refer to Other Regulatory and Statutory Disclosures on page 99 of this Red Herring Prospectus. 13

30 PYRAMID SAIMIRA THEATRE LIMITED CAPITAL STRUCTURE The share capital of our Company as on the date of filing of this Red Herring Prospectus with SEBI is as set forth below. Share Capital as on the date of filing of this Red Herring Prospectus Amount Aggregate Aggregate Value at Value at Nominal Price Issue Price A. Authorised Capital 3,30,00,000 Equity Shares of Rs.10/- each 33,00,00,000 B. Issued, Subscribed and Paid-Up Capital before this Issue 1,98,25,000 Equity Shares of Rs 10/- each 19,82,50,000 C Issue in terms of this Red Herring Prospectus [ ] Equity Shares of Rs.10/- each issued at Rs.[ ] each 84,44,00,000 D. Promoter s Contribution [ ] Equity Shares of Rs.10/- each issued at Rs.[ ] each [ ] [ ] E. Reservation for Employees [ ] Equity Shares of Rs.10/- each issued at Rs.[ ] each [ ] [ ] F. Net Issue to Public [ ] Equity shares of Rs. 10/- each as net issue to public [ ] [ ] Of which QIB portion of up to [ ] Equity Shares [ ] [ ] Non Institutional Portion of at least [ ] Equity Shares [ ] [ ] Retail Portion of at least [ ] Equity Shares [ ] [ ] G. Equity Share Capital after the issue [ ] Equity Shares of Rs.10/- each [ ] H. Securities Premium Account (1) Before this Issue 10,08,05,939 After this Issue [ ] (1) The amount standing in the Securities Premium Account, on a pre-issue basis, is Rs. 10,08,05,939. The increase in the Securities Premium Account as a result of the Issue will be completed only after the Issue Price is determined. The Company was incorporated with an authorised share capital of Rs. 50,00,000 divided into 5,00,000 Equity Shares of Rs. 10/- each. The authorised share capital was increased to Rs. 5,00,00,000 divided into 50,00,000 Equity Shares of Rs. 10 each pursuant to an ordinary resolution passed at the EGM held on 31/03/2005. This was further increased to Rs. 33,00,00,00 divided into 3,30,00,000 Equity Shares of Rs. 10 each pursuant to a special resolution passed at the EGM held on 23/05/

31 1. Share Capital History of the Company Date of No. of Cumulative Face Issue Nature of Reasons for Cumulative Allotment/ Equity No. of Value Price payment of Allotment/ Paid -up Reduction Shares Shares consideration Reduction Capital 26/06/ (2) Cash Subscription to 200 Memorandum of Association 10/07/ (348) Cash Allotment to the Promoters 35,000 31/03/2001 2,87,280 2,90, Cash Allotment to the Promoters, Relatives and Friends 29,07,800 31/03/ ,41,355 47,32, Cash Allotment to the Promoters, 4,73,21,350 Relatives and Friends 31/03/ ,500 47,63, Other than Cash Allotment to 4,76,36,350 in lieu of Associates agreement dated 04/04/ /09/ ,18,600 69,82, Cash Allotment to the Promoters, 6,98,22,350 Directors, Friends 23/09/ ,00,000 1,29,82, Cash Allotment to Friends and 12,98,22,350 the Strategic Investors 22/03/ ,70,000 1,61,52, Cash Allotment to Persons 17,63,23,000 acting in concert with Promoter and friends 27/04/2006, 14,80,065 1,76,32, Cash Persons acting in concert 17,84,49,350 with Promoter 27/04/2006 9,48,200 1,85,80, Cash Allotment to friends 18,58,05,000 30/05/2006 7,44,500 1,93,25, Cash Allotment to friends 19,32,50,000 03/06/2006 5,00,000 1,98,25, Cash Allotment to Bennett, 19,82,50,000 Coleman & Co. Ltd. 15

32 PYRAMID SAIMIRA THEATRE LIMITED 2. Promoters Contribution and Lock-In Name of the Date on which Number of Face Issue/ Consideration Percentage of Promoter Equity Shares Equity Shares Value Transfer (cash, bonus, post-issue were allotted/ (in Rs) price in consideration paid-up capital transferred and Rs. other than cash) made fully paid up Mr.V.Natarajan 20/06/ Cash [ ] 10/07/ Cash [ ] 10/07/ Cash [ ] 31/03/ , Cash [ ] 31/03/2005 2,594, Cash [ ] 12/9/ , Cash [ ] 23/09/ , Cash [ ] 13/07/2006 1,140, Cash [ ] Less Transfers 17/09/2005 (1,500,000) Cash [ ] 28/03/2006 (2,000,000) Cash [ ] 24/11/2006 (200,000) Cash [ ] TOTAL (A) 1,002,000 Mr.P.S.Saminathan 31/03/2005 1,046, Cash [ ] 12/9/2005 1,398, Cash [ ] 23/03/ , Cash [ ] 23/03/ , Cash [ ] 27/03/2006 2,100, Cash [ ] 17/04/ , Cash [ ] 27/04/ , Cash [ ] 29/04/2006 5, Cash [ ] 8/5/ , Cash [ ] 2/6/2006 1,000, Cash [ ] 8/6/ , Cash [ ] 23/06/ , Cash [ ] 4/7/ , Cash [ ] 12/7/ , Cash [ ] 16/8/ , Cash [ ] 03/10/ , Cash [ ] 16/10/ , Cash [ ] 21/11/ , Cash [ ] 24/11/ , Cash [ ] 24/11/ , Cash [ ] Less Transfers [ ] 17/09/2005 (1,200,000) Cash [ ] 19/04/2006 (850,000) Cash [ ] 22/05/2006 (2,000,000) Cash [ ] 16

33 Name of the Date on which Number of Face Issue/ Consideration Percentage of Promoter Equity Shares Equity Shares Value Transfer (cash, bonus, post-issue were allotted/ (in Rs) price in consideration paid-up capital transferred and Rs. other than cash) made fully paid up 13/07/2006 (2,018,715) Cash [ ] 15/09/2006 (395,000) Cash [ ] 21/09/2006 (125,000) Cash [ ] 17/10/2006 (25,000) Cash [ ] 17/10/2006 (70,000) Cash [ ] 18/10/2006 (70,000) Cash [ ] 20/10/2006 (65,000) Cash [ ] 30/10/2006 (50,000) Cash [ ] 1/11/2006 (90,000) Cash [ ] 14/11/2006 (40,000) Cash [ ] 18/11/2006 (60,000) Cash [ ] 24/11/2006 (400,000) Cash [ ] TOTAL (B) 2,925,885 Mr. N. Narayanan 31/03/ , Cash [ ] 12/9/ , Cash [ ] 13/07/2006 1,078, Cash [ ] Less Transfers 17/09/2005 (300,000) Cash [ ] TOTAL (C) 1,493,000 TOTAL (A+B+C) 5,420,885 Out of the existing pre-issue shareholding of the Promoters totaling 54,20,885 equity shares of Rs. 10/- each, 47,22,635 equity shares are eligible towards calculation of Promoters Contribution and will be locked in for a period of 3 years. In the event that the promoters holding of the post issue paid up capital is less than 20% of the post issue equity share capital of the Company, the short fall will be brought in by the promoters at the issue price and the same would be subject to a lock-in of three years as required by the Guidelines. Shares held by the person other than the Promoters, prior to this Issue, which are subject to lock in as per the relevant provisions of Chapter IV of SEBI Guidelines, may be transferred to any other person holding shares which are locked in, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 as applicable. Shares held by Promoter(s) which are locked in as per the relevant provisions of Chapter IV of the SEBI Guidelines, may be transferred to and amongst Promoter/Promoter group or to a new promoter or persons in control of the Company, subject to continuation of lock-in in the hands of transferees for the remaining period and compliance of Securities and Exchange Board of India (Substantial Acquisition of shares and Takeovers) Regulations, 1997, as applicable. The lockedin Equity Shares held by the Promoter(s) can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan. 17

34 PYRAMID SAIMIRA THEATRE LIMITED 3. Transactions in the Company s Equity Shares by the Promoters/Promoter Group and the directors of the Company or directors of the Promoters during a period of six months preceding the date of filing of this Red Herring Prospectus with SEBI Except as stated below, there have been no transactions in the Company s Equity Shares by the Promoters/Promoter Group and the Directors of the Company or directors of the Promoters during a period of six months preceding the date of filing of this Red Herring Prospectus with SEBI. Date of Transaction Name of the Name of the No. of Price per Transaction Transferee Transferor Equity Equity Shares Share (in Rs.) 02/06/2006 Purchase P.S. Saminathan Accord Capital Markets 8,00, /06/2006 Purchase P.S. Saminathan Jagdish Choudhury 1,50, /06/2006 Purchase P.S. Saminathan Shaswata Choudhury 50, /06/2006 Purchase P.S. Saminathan Rubina Bhandari 50, /06/2006 Purchase P.S. Saminathan Ashu Bhandari 50, /06/2006 Purchase P.S. Saminathan Bharat Kumar Bhandari 50, /06/2006 Purchase P.S. Saminathan Gaurav Bhandari 50, /06/2006 Purchase P.S. Saminathan U.C. Bhandari 50, /06/2006 Purchase P.S. Saminathan S. Ganapathy 2,70, /07/2006 Purchase P.S. Saminathan U.C. Bhandari 4,50, /07/2006 Purchase P.S. Saminathan Mercury Fund Management 3,00, Co. Ltd 13/07/2006 Purchase P.S. Saminathan U.C. Bhandari 2,00, /07/2006 Inter-se promoter transfer V. Natarajan P.S. Saminathan 11,40, /07/2006 Inter-se promoter transfer N. Narayanan P.S. Saminathan 10,78, /08/2006 Purchase P.S. Saminathan Accord Capital Markets 6,00, /09/2006 Sale Aditya P. Kapadia P.S. Saminathan 1,35, /09/2006 Sale Harshadray Pvt. Ltd. P.S. Saminathan 1,35, /09/2006 Sale Udaipur Cotton Mills Ltd. P.S. Saminathan 1,25, /09/2006 Sale Rita Kothari P.S. Saminathan 68, /09/2006 Sale Shobha Kothari P.S. Saminathan 56, /10/2006 Purchase Infrastructure Leasing P.S. Saminathan 1,00, & Financial Services Ltd. 16/10/2006 Purchase Accord Capital P.S. Saminathan 6,00, Markets 18

35 17/10/2006 Sale Infrastructure Leasing P.S. Saminathan 25, & Financial Services Ltd. 17/10/2006 Sale Nirmala Navinchandra P.S. Saminathan 5, Haria 17/10/2006 Sale Pritesh Amritlal Nandu P.S. Saminathan 20, /10/2006 Sale Amrutlal Morarji Nandu P.S. Saminathan 20, /10/2006 Sale Amrutlal Morarji Nandu HUF P.S. Saminathan 10, /10/2006 Sale Pritesh Amrutlal Nandu P.S. Saminathan 15, HUF 18/10/2006 Sale Rajesh Devchand P.S. Saminathan 55, Prasad 18/10/2006 Sale Daksha M. Haria P.S. Saminathan 5, /10/2006 Sale Shamji Thukushi P.S. Saminathan 5, Dedhia 18/10/2006 Sale Mahesh K. Haria P.S. Saminathan 5, /10/2006 Sale Deepak Thakker P.S. Saminathan 65, /10/2006 Sale Chandrika Dpiesh Gala P.S. Saminathan 5, /10/2006 Sale Rupal Dhiren Haria P.S. Saminathan 5, /10/2006 Sale Aruna Amrutlal Nandu P.S. Saminathan 25, /10/2006 Sale Vishali Pritesh Nandu P.S. Saminathan 10, /10/2006 Sale Dipesh Vijpal Gala P.S. Saminathan 5, /11/2006 Sale Dhiraj Anopchand P.S. Saminathan 50, Mehta 01/11/2006 Sale Sanjiv Sanghvi P.S. Saminathan 20, /11/2006 Sale Shantilal Kubadia P.S. Saminathan 10, /11/2006 Sale Rajesh Morabia P.S. Saminathan 5, /11/2006 Sale Madhu Rajesh Morbia P.S. Saminathan 5, /11/2006 Sale Mickin Mukund Sheth P.S. Saminathan 10, /11/2006 Sale Hiren Mohanlal Shah P.S. Saminathan 30, /11/2006 Sale Nikhil Meswani P. S. Saminathan 30, /11/2006 Sale Elina N. Meswani P. S. Saminathan 30, /11/2006 Promoter Group Nirmal Kotecha P. S. Saminthan 1,70, transfer 24/11/2006 Sale Emirates Family of P. S. Saminathan 4,00, Funds 24/11/2006 Purchase P. S. Saminthan Accord Capital Markets 4,50, /11/2006 Inter-se Promoter P. S. Saminathan V. Natarajan 2,00, transfer 19

36 PYRAMID SAIMIRA THEATRE LIMITED 4. Shareholding pattern of the Company prior and post this Issue Name of the Shareholders Pre-Issue Equity Capital Post-Issue Equity Capital Number of % Number of % Equity Shares Equity Shares Promoters Mr.V.Natarajan 10,02, [ ] [ ] Mr.P.S.Saminathan 29,25, [ ] [ ] Mr. N. Narayanan 14,93, [ ] [ ] Sub-total (A) 54,20, [ ] [ ] Promoter Group Mr. Nirmal Kotecha 83,10, [ ] [ ] Sub-total (B) 83,10, [ ] [ ] Others (C) 60,94, [ ] [ ] Public (D) Nil [ ] [ ] Total (A+B+C+D) 1,98,25, [ ] a) Particulars of top ten shareholders on the date of filing this Red Herring Prospectus with RoC No. Name of the shareholder Number of Equity Shares % holding 1 Mr.Nirmal N.Kotecha 83,10, Mr.P.S.Saminathan 29,25, Mr.N.Narayanan 14,93, Mr.V.Natarajan 10,02, M/s.Bennett Coleman & Co.Ltd 5,00, Emirates Family of Funds 4,00, M/s.Silver Cross Marketing Pvt.Ltd 3,40, M/s.Mercury Fund Mangement Co.Ltd. 2,50, Mr.Hiren Mohanlal Shah 2,30, Mr.Laxmichand Manshi Shah 2,00, Mr.Mohanlal Manshi Shah 2,00, TOTAL 1,58,50,

37 5 b) Particulars of top ten shareholders ten days prior to filing this Red Herring Prospectus with RoC No. Name of the shareholder Number of Equity Shares % holding 1 Mr.Nirmal N.Kotecha 84,80, Mr.P.S.Saminathan 25,65, Mr.N.Narayanan 14,93, Mr.V.Natarajan 12,02, M/s.Prudential Stock and Secutities Limited 6,00, M/s.Bennett Coleman & Co.Ltd 5,00, M/s.Silver Cross Marketing Pvt.Ltd 3,40, M/s.Mercury Fund Mangement Co.Ltd. 2,50, Mr.Hiren Mohanlal Shah 2,30, Mr.Laxmichand Manshi Shah Mr.Mohanlal Manshi Shah TOTAL 1,60,60, c) Particulars of the top ten shareholders 2 years prior to the date of filing of this Red Herring Prospectus with RoC No. Name of the shareholder Number of Equity Shares % holding 1. Mr.V.Natarajan 1,85, Mr.V.Venkatesan 40, Mr.V.Naagarajan 46, Mrs.Meera Naagarajan 7, Mr.Thiagarajan 4, Mr.Anand Agarwal 3, Mr.Abhay Kumar 2, Mr. Kumar Natarajan Mr. Ganesh Padmanavan Mr. Vijay Bhaskar TOTAL 2,90, Our Company, its Directors, the Promoters and their Directors, the BRLM and the Co-BRLM, to this Issue have not entered into any buy-back, standby or similar arrangements for purchase of Equity Shares of the Company from any person 7. The total number of members of our Company as on the date of filing this Red Herring Prospectus with RoC is Our Company has not raised any bridge loan against the proceeds of this Issue. 9. [ ] Equity Shares have been reserved for Allocation to the Employees on a proportionate basis, subject to valid bids being received at or above the Issue Price and subject to the maximum bids in this portion being the number of shares reserved under this category, which is [ ] Equity Shares. Only the Employees as defined in the chapter titled Definitions and Abbreviations of this Red Herring Prospectus would be eligible to apply in this Issue under the reserved category for our Employees. Employees may also bid in the Net Issue to public portion and such Bids shall not be treated as multiple Bids. Any under subscription in the Equity Shares under the Employee Reservation Portion would be added to the Net Issue and the proportionate allocation of the same would be at the sole discretion of the Company in consultation with the BRLM. 21

38 PYRAMID SAIMIRA THEATRE LIMITED 10. The bids in the Employee Reservation Portion are subject to a maximum bid for [ ] Equity Shares. If the aggregate demand in the Employee Reservation Portion is greater than [ ] Equity Shares at or above the Issue Price, allotment shall be made on a proportionate basis. 11. In the case of over-subscription in all categories, not more than 50% of the Net Issue to the Public shall be allocated on a proportionate basis to Qualified Institutional Buyers, of which 5% shall be reserved for Mutual Funds. Further, not less than 15% of the Net Issue to the Public shall be available for allocation on a proportionate basis to Non Institutional Bidders and at least 35% of the Net Issue to the Public shall be available for allocation on a proportionate basis to Retail Individual Bidders, subject to valid bids being received at or above this Issue Price. Under-subscription, if any, in the Non Institutional and Retail categories would be allowed to be met with spill over from any other category at the sole discretion of the Company in consultation with the BRLM. 12. An over-subscription to the extent of 10% of this Issue size can be retained for the purpose of rounding off while finalizing the Basis of Allotment. 13. There would be no further issue of capital whether by way of issue of bonus shares, preferential allotment, and rights issue or in any other manner during the period commencing from submission of this Red Herring Prospectus with SEBI until the Equity Shares offered through this Red Herring Prospectus have been listed. 14. We presently do not have any intention or proposal to alter our capital structure for a period of six months from the date of opening of this Issue, by way of split/ consolidation of the denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into exchangeable, directly or indirectly, for our Equity Shares) whether preferential or otherwise, except that if we enter into acquisitions or joint ventures, we may consider raising additional capital to fund such activity or use Equity Shares as currency for acquisition or participation in such joint ventures. 15. Our Company has not revalued its assets since inception. 16. Our Company has not capitalized any of its reserves since inception. 17. A Bidder cannot make a Bid for more than the number of Equity Shares offered through this Issue, subject to the maximum limit of investment prescribed under relevant laws applicable to each category of investor. 18. Our Company has not made any public issue since its incorporation. 19. Our Company undertakes that at any given time, there shall be only one denomination for the Equity shares of the Company and the Company shall comply with such disclosure and accounting norms as specified by SEBI from time to time. 20. As on the date of filing of this Red Herring Prospectus, there are no outstanding warrants, options or rights to convert debentures, loans or other financial instruments into our Equity Shares. The shares locked in by the Promoters are not pledged to any party. The locked-in Equity Shares held by the Promoter can be pledged only with banks or financial institutions as collateral security for loans granted by such banks or financial institutions, provided the pledge of shares is one of the terms of sanction of such loan to the Company. 22

39 OBJECTS OF THE ISSUE The objects of the Issue are to achieve the benefits of listing on the Stock Exchanges and to raise capital. We believe that listing will enhance the Company s brand image and provide liquidity to the Company s existing shareholders. Listing will also provide a public market for the Equity Shares in India. The main objects clause and objects incidental or ancillary to the main objects clause of the Memorandum of Association of the Company enable us to undertake the existing activities and the activities for which the funds are being raised through this Issue. The main objects of this Issue are: 1. To create a theatre chain having a tie up with theatres and multiplexes on long lease and invest in infrastructure up-gradation of the theatres. 2. To convert theatres into digital exhibition systems by installing Digital Projectors, Servers, VSAT terminals and such other audio & video equipments as needed. 3. To invest in a central network operating system control center which will enable Service Provisioning for and including Content Conversion, Transmission, Rights management, Theatre management & Networked collection / revenue management. 4. To meet working capital requirement including procurement of films and non film based contents, expenses in the nature of marketing of the business of the company and to provide margin money for working capital borrowing. 5. To meet the general corporate expense as well as pre-operative expenses including Interest during construction period. 6. To meet the expenses of this public issue. REQUIREMENT OF FUNDS AND MEANS OF FINANCE Total fund requirement is estimated as follows: Particulars Amount (Rs. Lakhs) Cost of renovation & upgradation of Theatres & other Footfall rights 3, Plant & Machinery & Installation cost for digitalisation of Theatres 2, Plant & Machinery and other cost for Central Network Operating Center Recoverable Security Deposit with Theatres & Multiplexes 2, Recoverable Security Deposit with VMPL Preliminary expenses Brand Building Working Capital Cost relating to Public Issue Contingencies TOTAL 11, MEANS OF FINANCE Public Issue of [ ] Equity shares of Rs. 10/- each for cash at a price of [ ] 8, (including promoters contribution and employees reservation Pre-issue capital and internal accruals 2, TOTAL 11, An amount of Rs lacs has already been brought in by the promoters as on 10/11/2006, towards their contribution to the Issue. As on 10/11/2006, an amount of Rs. 2, lacs has been deployed by our Company on the Objects of the Issue. For further details, please refer to Sources and Deployment of Funds on page 28 of this Red Herring Prospectus. 23

40 PYRAMID SAIMIRA THEATRE LIMITED NET ISSUE PROCEEDS The details of the proceeds of the Issue are summarized below: Estimated Amount (Rs. Lakhs) Gross proceeds of the Issue 8, Issue related expenses Net Proceeds of the Issue 7, USE OF PROCEEDS OF THE ISSUE The project is already under implementation. We have started tying up with theaters under long lease to form the chain. Please refer to the Sources and Deployment of Funds certificate dated 16/11/2006 prepared by our statutory auditor R. Mugunthan on page 28 of this Red Herring Prospectus. The following table summarizes use of the fund over fiscal 2007 and fiscal 2008, as estimated by the management: Amount (Rs. In lakhs) Particulars Fiscal 2007 Upto June 2007 Total Cost of acquisition, renovation & upgradation of Theatres 2, , Plant & Machinery & Installation cost for Digitalisation 1, , of Theatres Plant & Machinery and other cost for Central Network Operating Center Recoverable Security Deposit with Theatres & Multiplexes 1, , Recoverable Deposit with VMPL Preliminary expenses Brand Building Working Capital Cost relating to Public Issue Contingencies TOTAL , , Our Company proposes to deploy the funds as under:- A] TIE UPS & UPGRADATION OF THEATRES As part of the plan to form a chain of digital theatres in India, we have begun the process of identifying and tying up with owners of traditional theatres and multiplexes for their renovation and upgradation to digital theatres. The average length of the lease varies from five to fifteen years with options for renewal at the end of each lease period. The renovation and upgradation of the traditional theatres and multiplexes entails but is not restricted to the following: improvement of quality of seats and seating arrangement, improved toiletary facilities, parking facilities, high quality food & beverages, standardizing the outlook of the theaters upgradation to the other aspects of the theatre s infrastructure. 24

41 We plan to tie-up with 120 theatres in A locations and 235 theaters in B and C locations by March The following table outlines the cost per theatre for the upgradation and acquisition of remunerative footfall rights: Activity Cost per theatre (Rs. Lakhs) A Locations B & C Locations Renovation and Upgradation Expenditure Acquisition of F&B and other footfall rights TOTAL Number of theatres proposed to be tied-up Estimated total expenditure to be incurred 1, , B] DIGITALISATION OF THEATRES The conversion of the existing traditional theatres into Digital Theatres involves installation of certain equipment at each theatre. In order to defray the heavy investment involved in the digitalization of traditional theatres, we have entered into an agreement dated 20/04/2006 with M/s. Valuable Media Private Limited [ VMPL ] for the installation of comprehensive digital cinema systems which include digital projectors, servers and various digital cinema services including delivery of content to the theatres in our chain. The provision of these equipment and services will be on a pay-per-use basis. As per the agreement, VMPL will provide the required equipment and services for upto 1,000 theatres on the current terms and conditions of the agreement. The following table sets forth the equipment required for digitalization of each theatre and the costs of the rest of the equipment that will be purchased by us: Sr. Item (Rs. / Theatre) Total Cost No. For 355 theatres (Rs. Lakhs) 1 Digital Projectors To be provided by VMPL on a pay-per-use basis 2 Video Servers 3 Communication System 4 Audio System 5,22,000 1, Software Solutions 1,13, Installation Cost 45, TOTAL 6,80,000 2, In addition to the above, a payment of Rs lakhs per theatre will be made to VMPL as a refundable deposit for the installation and use of their machinery on a pay-per-use basis. The total outlay in this regard for 355 theatres is Rs lakhs. We propose to have uniform quality standard of gigitalisation in all our theatres irrespective of its location to achieve high quality cinema viewing. The equipment that will be provided by VMPL will meet our standard specifications. In addition, we have also identified various suppliers of equipment required for digitalization and have entered into agreements with each vendor, details of which are set forth as under: (i) Digital Projectors: We have entered into an agreement dated 11/04/2005 with M/s Bharat Digitals Ltd [ BDL ] and placed an order with them for an initial lot of 50 projectors. BDL has, in turn, entered into an agreement with Delta Electronics, Taiwan, for the supply of digital projectors are designed to operate in the conditions prevalent in India. 25

42 PYRAMID SAIMIRA THEATRE LIMITED (ii) (iii) Video Servers: We have entered into an agreement dated 06/04/2005 with Real Image Media Technologies Pvt. Ltd. [ Real Media ] for the supply of digital video play out servers for our theatres. Communication Systems: We have entered into an agreement dated 22/08/2004 with Tatanet, for the utilization of their Broadband VSAT infrastructure and network of partners for the provision of enterprise networking solutions and internet access over satellites all across India and system integration across the world. (iv) Audio Systems: The exisiting audio systems of theatres in our chain will be upgraded by the installation of digital audio servers at each location by us. The audio track output from the video servers will be fed in to each theatre s audio server and piped through the speaker system in the theatre. This will facilitate digital audio output in various industry standards across all location. We will upgrade the audio system in those theatres where the existing quality of audio is low or incompatible with digital audio standards. This may entail the installation of amplifiers and speakers wherever required to augment the sound quality and output. (vi) Software Solutions: We have entered into an agreement dated 27/03/2005 with Voice Snap Software Ltd [ VSSL ] wherein VSLL shall develop customer relationship management software. This software package would include ticketing, customer database, radio frequency identification, customer relationship management and other Relational Database Management System (RDBMS) applications C] CENTRAL NETWORK OPERATING CENTRE [ NOC ] The Network Operating Centre is the nerve center for managing and controlling our entire theatre chain. The NOC will have addressability to all the theatres in our chain via VSATs with back up provisioning on a broadband network. The digital rights management, show timing, play list, advertisement management, etc., will be controlled from the NOC. The server pool and back up pool along with library management will form part of the NOC. The NOC will also monitor the entire ticketing process online. It may be noted that as part of the modernization of the theatres in our chain, all ticketing mechanisms of the theatres will be computerized and controlled centrally to allow greater flexibility in reservations and pricing of seats in any of our theatres. The NOC will consist of the following equipment, details and quoted costs of which are set forth as under: Description (Rs. Lakhs) Servers Storage Firewall servers 6.97 CISCO pix firewall CISCO router CISCO switch APC ISX Server 2.19 Replicator Commissioning and deployment of storage Replicator solution LAN Passive components 2.20 Software TOTAL The contract for the setup of the NOC is proposed to be placed with M/s. AXIS Info Services, an IBM partner, whose quotation has been used as the basis of the cost estimates mentioned in the table above. 26

43 D] RECOVERABLE SECURITY DEPOSIT AGAINST LEASE RENT This includes payment of refundable security deposits to be made to the owners of the theatres and multiplexes and the same will be refunded on determination of the lease period. We have estimated a deposit equivalent to three months rent for this purpose. Rs. in Lakhs Activity A Locations B & C Locations Total Refundable Security Deposit per theatre Number of theatres proposed to be tied-up SUB TOTAL , Refundable Security Deposit for multiplexes 1, GRAND TOTAL 2, E] PRELIMINARY AND PRE-OPERATIVE EXPENSES: Preliminary and pre-operative expenses consist of expenditure on project personnel, overheads and trial runs during implementation of the project and are part of the project. We have considered Rs lakhs as preliminary & pre-operative expenses of the project. F] BRAND BUIDLING Our Company has ear-market Rs lakhs for the purpose of advertising and creating awarness about the Company. G] WORKING CAPITAL We need working capital primarily to procure films and non-film based content and pay advance lease rental to theatre owners. The total working capital requirement is set forth as follows: Particulars Amount (Rs. in lakhs) Lease rent for theatres Operation expenses Content Advance Total Working Capital requirement H] CONTINGENCIES: We have provided for Rs lakhs to cover price increases and any unforeseen costs. I] ISSUE EXPENSES The estimated Issue expenses are as follows: Activity (Rs. in lakhs) Lead Management Fee, Underwriting Commissions and Selling Commissions Advertising and Marketing Expenses Printing and Stationery Others (Registrar s Fee, Legal Fee, etc.) Total estimated Issue expenses

44 PYRAMID SAIMIRA THEATRE LIMITED INTERIM USE OF FUNDS Pending utilization of the proceeds out of the Issue for the purposes described above, we intend to temporarily invest the funds in high quality interest bearing liquid instruments including deposits with banks. Such investments would be in accordance with the investment policies approved by the Board of Directors from time to time. SOURCE AND DEPLOYMENT OF FUNDS We have received the Sources and Deployment Funds Certificate dated 16/11/2006 from Mr. R. Muguthan Chartered Accountants and Statutory Auditors of our Company. The certificate states that the Company has till 10/11/2006, deployed amounts aggregating Rs. 2, lakhs. Details of the sources and deployment of funds as per the certificate are as follows:, Particulars Rs. Lakhs Application of Funds Cost of renovation & upgradation of theatres and other foot fall mall rights - Locations in Category A centres Locations in Category B centres Plant & Machinery (including advances) & Installation cost for digitalization of theatres Plant & machinery and other cost for Central Network Operating Centre Recoverable security deposit with theatre & multiplexes - Locations in Category A centres Locations in Category B centres Recoverable security deposit for digital theatre equipments Advance pending utilization Advances for brand building and launch cost Working capital Cost relating to public issue TOTAL 2, Source of Funds Rs. Lakhs Share Capital (01/04/2005 to 10/11/2006) Share Premium (01/04/2005 to 10/11/2006) Share Application Money towards Promoters Contribution in the Public Issue - pending allotment TOTAL 2, Monitoring of Utilization of Funds M/s. Canara Bank, Mount Road Branch, located at , Rayala Towers, Anna Salai, Chennai , have given their consent to act as the Monitoring Agency to monitor the utilization of funds. The Monitoring Agency will file periodic monitoring reports with SEBI as per the format specified at in the SEBI (DIP) Guidelines, 2000, on a half yearly basis, till the completion of project, for the purposes of record. We will disclose the utilisation of the proceeds of the issue under a separate heading in our Directors Reports clearly specifying the purpose for which such proceeds have been utilised. We will also, in our Directors Reports provide details, if any, in relation to all such proceeds of the issue that have not been utilised thereby also indicating investments, if any, of such unutilised proceeds of the issue. 28

45 BASIS OF ISSUE PRICE The Price Band for the Issue Price will be decided by us in consultation with the BRLM and specified in the Red Herring Prospectus that will be filed with the Registrar of Companies. The Price Band will also be advertised in an English language newspaper, a Hindi language newspaper with wide circulation and a regional newspaper. The Issue Price will be determined by our Company in consultation with the BRLM on the basis of assessment of market demand for the offered Equity Shares by the Book Building Process. The face value of the Equity Shares is Rs. 10 and the Issue Price is 8.8 times the face value at the lower end of the Price Band and 10 times the face value at the higher end of the Price Band QUALITATIVE FACTORS Industry: Entertainment industry is poised for a very high growth and film industry is the most important raw material for the entire entertainment industry. Currently PSTL is the only company having a holistic approach to this industry and has a first mover advantage. In South India, there has been no competition at all and in North India, other players are only malled segment. Project: Our Mega Digital Theatre Chain project, currently under implementation, is the first of its kind in India. We have the first mover advantage in the field of digitalization of theatres and digital exhibition of films. Our project, which was launched in November 2005, has already started generating revenue. Segment: Our Company addresses all the industry segments such as malls, multiplexes, cine-plexes, single screen theatres, etc. The company s presence is geographically wide spread and across various scio-economic categories of customers. Currently PSTL is the only theatre chain company present in the all segments of the exhibition industry. Value Chain: Our strategy of tying up various types of exhibitions venues, as well as our presence in the distribution segment gives us a grip on two key segments in the value chain of the film industry viz. exhibition and distribution. Financing tie-ups: We have tied up equipment and services for the digital cinema system on a pay-per-use basis with Value Media Pvt. Ltd. for upto 1,000 theatres. This agreement is worth approximately Rs crores and gives our company a high level of operational scalability. Professional Management Team: Our promoters bring with them substantial domain experience and credibility in areas of film production, project financing, project implementation and enterprise administration. Our company is supported by a strong advisory board and the company has an experienced and qualified senior management team. Strong / Credible & Proven Technical Support tie-ups: Our project has achieved technical closure. We have entered into technical agreements for the provision of various systems and services with several reputed providers in India and abroad such as Tata Net, Delta Electronics, Arasor Technology, Value Media and Real Image. For details of these agreements kindly refer to page 46 of this Red Herring Prospectus. Scaleability: On account of the fact that we are tying up theatres and multiplexes on long term leases rather than purchasing them, our project entails much leaner utilization of capital, allowing us to tie large numbers of theatres and multiplexes within short periods of time. The equipment that is required for the digitalization of the theatres is being procured on a pay-per-use basis rather than outright purchases, further reducing the capital requirements. This gives the project high scalability across the country. QUANTITATIVE FACTORS The information about us that has been presented in this section is derived from our restated financial statements prepared in accordance with the applicable Accounting Standards. Some of the quantitative factors, which may form the basis for computing the Issue Price, are as follows: 29

46 PYRAMID SAIMIRA THEATRE LIMITED 1. Earning Per Share (EPS) YEAR EPS (Rs.) Weight 31/03/ /03/ /03/ Weighted Average 0.84 For the six month period ended 30/09/2006, the Company has generated an EPS of Rs. 2.57, which translates to an EPS of Rs on an annualized basis. 2. Price/Earning Ratio (P/E) in relation to Issue Price of Rs. [ ] 3. Return on Net Worth (RONW) YEAR RONW (%) Weight 31/03/ /03/ /03/ Weighted Average 5.04 For the six month period ended 30/09/2006, the RONW of the Company is 13.54% on an annualized basis. 4. Minimum Return on Increased Net Worth to maintain pre-issue EPS - [ ] 5. Net Asset Value (NAV) per share YEAR EPS (Rs.) NAV as on 30/09/ Issue Price [ ] NAV after the Issue [ ] 6. Industry Average P/E We have identified four listed companies viz. Adlabs Films Ltd., Inox Leisure Ltd., PVR Ltd. and Shringar Cinemas Ltd., who are engaged in a similar line of business as our company. The P/E Multiples set forth below have been extracted from this peer set only. Name of the company P/E Multiple Highest (Shringar Cinema Ltd.) Lowest (Adlabs Films Ltd.) 35.4 Average Source: Capital Market Nov 20 Dec 03, 2006; Segment Entertainment/Electronic Media Software, 30

47 7. Comparison with Peer Group The comparative analysis of the financial performance of companies engaged in similar nature of business is mentioned below: (figures are for the trailing twelve months ended 30/09/2006) Name of the Sales Net Profit Book EPS P/E Multiple based on company (Rs.in crore) (Rs. in crore) Value (Rs.) (Rs.) the Market Price as on 13/11/2006(times) Adlab Films Ltd Inox Leisure Ltd PVR Ltd Shringar Cinemas Ltd Source: Capital Market Nov 20 Dec 03, 2006; Segment Entertainment/Electronic Media Software (figures are for the six month period ended 30/09/2006) Pyramid Saimira Theatre Ltd [ ] (annualized) 8. The face value of Equity Shares of PSTL is Rs. 10 and the issue price is [ ] time of the face value. The Issue Price of Rs. [ ] has been determined by the Company in consultation with the BRLM, on the basis of assessment of market demand for the Equity Shares by way of Book Building. On the basis of the above parameters the issue price of Rs. [ ] per share is justified. 31

48 PYRAMID SAIMIRA THEATRE LIMITED STATEMENT OF TAX BENEFITS The Board of Directors Pyramid Saimira Theatre Limited C-1, 2 nd Floor, Temple Tower, 672, Anna Salai, Chennai. Dear Sirs, Under the current provision of the Income Tax Act, 1961 and the existing laws for the time being in force, the following benefits, interalia, will be available to the Company and the members. A member is advised to consider in his /her/its own case the tax implications of an investment in the Equity Shares, particularly in view of the fact that certain recently enacted legislations may not have direct legal precedent or may have a different interpretation on the benefits which an investor can avail. Under the Income Tax Act, 1961 ( Act ) Benefits available to the Company 1. Any Dividend received by the Company as referred to in section 115-O from the other domestic Companies is exempt u/s 10(34) of the Income Tax Act, Under Section 35(1)(iv) of the Income Tax Act, the Company will be entitled to a deduction of the entire Capital expenditure (other than acquisition of land) incurred on Scientific Research related to the business carried on by the Company in the year such expenditure is incurred. 3. The Company will be entitled to amortization of expenses over a period of 5 years under the provisions of section 35D of the Income Tax Act, in respect of the expenditure incurred by the Company being in nature of preliminary expenses and Share issue expenses such as underwriting Commission, Brokerage other charges etc, subject to the limits prescribed under the said section. 4. Under Section 115JAA(1A), for the amount of tax paid under Section 115JB(1), credit shall be allowed in accordance with the provisions of that Section, which can be adjusted against future tax liability. Benefits available to resident shareholders Dividends exempt under Section 10(34) Dividends (whether interim or final) declared, distributed or paid by the Company as referred to in Section 115 O of the Income Tax Ac, 1961, are exempt in the hands of shareholders as per the provisions of Section 10(34) of the Act. Computation of Capital Gains Capital assets may be categorized into short term capital assets and long term capital assets based on the period of holding. All capital assets (except shares held in a Company or any other listed securities or units of UTI or specified Mutual Fund units) are considered to be long term capital assets if they are held for a period in excess of 36 months. Shares held in a Company, any other listed securities, units of UTI and specified Mutual Fund units are considered as long term capital assets if these are held for a period exceeding 12 months. Consequently, capital gains arising on sale of Shares held in a Company or any other listed securities or units or UTI or specified Mutual Fund units held for more than 12 months are considered as long term capital gains. Section 48 of the Act, which prescribes the mode of computation of capital gains, provides for deduction of cost of acquisition / improvement and expenses incurred in connection with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains. However, in respect of long term capital gains, it offers a benefit by permitting substitution of cost of acquisition / improvement with the indexed cost of acquisition / improvement, which adjusts the cost of acquisition / improvement by a cost inflation index as prescribed from time to time. 32

49 Under section 10(38) of the Act, long term capital gains arising on sale of shares where the transaction of sale is entered into on a recognized Stock Exchange in India, on or after such transaction chargeable to Securities Transaction Tax Shall be exempt from tax. Under Section 54EC of the Act and subject to the conditions and to the extent specified therein, long term capital gains arising on the transfer of shares of the company that are not exempt under section 10(38) of the Act, shall not be chargeable to tax if the whole or any part of the capital gains is invested in certain notified bonds within a period of six months after the date of such transfer. However if the said bonds are transferred on converted into money within three years from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money. Under section 54ED of the Act and subject to the conditions and to the extent specified therein, long term capital gains arising on the transfer of shares of the Company that are not exempt under section 10(38) of the Act, shall not be chargeable to tax if the whole or any part of the capital gains is invested in acquiring equity shares of Indian Company forming part of an eligible issue of share capital within a period of six months after the date of such transfer. However if the said shares are transferred within a period of one year from the date of their acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the shares are transferred. Eligible issue of share capital has been defined as an issue of equity shares which satisfies the following conditions: The issue is made by a public company formed and registered in India; and The shares forming part of the issue are offered for subscription to the public. Under section 54F of the Act, long term capital gains arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the company, will be exempt from tax subject to other conditions specified therein, if the sale proceeds from such shares are used for the purpose of purchase of residential house property within a period of one year before and two years after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under Section 111A of the Act, short term capital gains arising on sale of shares where the transaction of sale is entered into on a recognized stock exchange in India, on or after shall be subject to tax at a rate of 10% (plus applicable surcharge and education cess). Under section 112 and other relevant provisions of the Act, long term capital gains arising on transfer of shares of the company not covered by section 10(38) of the Act, shall be subject to tax at a rate of 20% (plus applicable surcharge and education cess) after indexation as provided in the second proviso to section 48 or at 10% (plus applicable surcharge and education cess) without indexation, at the option of the shareholder. However, as per the proviso to section 112(1) of the Act, if the tax on long term capital gains resulting on transfer of listed securities or units, calculated at the rate of 20% with indexation benefit exceeds the tax on long term capital gains computed at the rate of 10% without indexation benefit, then such gains are chargeable to tax at a concessional rate of 10% (plus applicable surcharge and education cess). Benefits available to Non Residents By Virtue of Section 10(34) of the IT Act, Income earned by way of dividend income from a domestic company referred to in Section 115-O of the IT Act, are exempt from tax in the hands of the recipients. Tax on Investment Income and Long Term Capital Gains Under section 10(38) OF THE Act, long term capital gains arising on sale of shares where the transaction of sale is entered into on a recognized Stock Exchange in India, on or after , such transaction chargeable to Securities Transaction Tax Shall be exempt from tax. Under Section 111A of the Act, short term capital gains arising on sale of shares where the transaction of sale is entered into on a recognized stock exchange in India, on or after shall be subject to tax at a rate of 10% (plus applicable surcharge and education cess). A non resident Indian (i.e. an individual being a citizen of India or person of Indian Origin) has an option to be governed by the provisions of Chapter XIIA of the Income Tax Act, 1961 viz., Special Provisions Relating to certain Incomes of 33

50 PYRAMID SAIMIRA THEATRE LIMITED Non-Residents. Under Section 115E of the Income Tax act, 1961, where shares in the company are subscribed for in convertible Foreign Exchange by a Non Resident Indian, capital gains arising to the non resident on transfer of shares held for a period exceeding 12 months shall (in cases not covered under Section 10(36) of the Act) be concessionally taxed at the flat rate of 10% (plus applicable surcharge) without indexation benefit but with protection against foreign exchange fluctuation. Capital gain on transfer of Foreign Exchange Assets, not to be charged in certain cases. Under Provisions of Section 115F of the Income tax Act, 1961, long term capital gains (not covered under Section 10(36) of the Act) arising to a non resident Indian from the transfer of shares of the Company subscribed to in convertible Foreign Exchange shall be exempt from Income Tax if the net consideration is reinvested in specified assets within six months of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted within three years from the date of their acquisition. Return of Income not to be filed in certain cases. Under provisions of Section 115G of the Income Tax Act, 1961, it shall not be necessary for a Non Resident Indian to furnish his return of income if his only source of income is investment income or long term capital gains or both arising out of assets acquired, purchased or subscribed in convertible foreign exchange and tax deductible at source has been deducted there from. Other Provisions: Under Section 115-I of the Income Tax Act, 1961, a Non-Resident Indian may elect not to be governed by the provisions of Chapter XII-A for any Assessment Year by furnishing his Return of Income under section 139 if the Income Tax Act declaring therein that the provisions of the Chapter shall not apply to him for that assessment year and if he odes so the provisions of this chapter shall not apply to him instead the other provisions of the Act shall apply. Under the first proviso to Section 48 of the Income Tax Act, 1961, in case of a non resident, in computing the capital gains arising from transfer of shares of the Company acquired in convertible foreign exchange (as per exchange control regulations) protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the original investment was made. Cost Indexation benefits will not be available in such as case. Under Section 54EC of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains (not covered under section 10(36) of the Act) arising on the transfer of shares of the Company will be exempt from capital gains tax if the capital gain are invested within a period of 6 months from the date of transfer in the bonds issued by National Highway Authority of India constituted under section 3 of National Highway Authority of India Act, Rural Electrification Corporation Limited, a Company formed and registered under the Companies Act, If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted within three years from the date of their acquisition. Under Section 54ED of the Income Tax Act, 1961 and subject to the conditions and to the extent specified therein, long term capital gains tax if the capital gains I invested in equity shares of Indian Public Company forming part of an eligible public issue, within a period of 6 months after the date of such transfer. If only part of the capital gain is so reinvested, the exemption shall be proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the specified assets are transferred or converted within one year from the date of their acquisition. Under Section 54F of the Income Tax Act, 1961 and Subject to the condition and to the extent specified therein. Long Term Capital gains (in case not covered under section 10(36) of the Act) arising to an individual or Hindu Undivided Family (HUF) on transfer of shares of the Company will be exempt from capital gain tax subject to other conditions, if the sale proceeds from such shares are used for purchase of residential house property within a period of one year before and to year after the date on which the transfer took place or for construction of residential house property within a period of three years after the date of transfer. Under Section 112 of the Income Tax Act, 1961, and other relevant provisions of the act, long term capital gains (not covered under Section 10(36) of the Act) arising on transfer of shares in the Company, if shares are held for a period exceeding 12 months shall be taxed at a rate of 10% (plus applicable surcharge) after indexation as provided in the second proviso to Section 48; indexation not available if investments made in foreign currency as per the first proviso to section 48 stated above) or at 10% (plus applicable surcharge) (without indexation), at the option of assessee. Benefits available to Mutual Funds Under Section 10(23D) of the Act, all Mutual Funds set up by Public Sector Banks or Public Financial Institutions or Mutual Funds registered under the Securities and Exchange Board of India or authorised by the Reserve Bank of India, subject to the conditions specified therein are eligible for exemption from income-tax on all their income, including income from investment in the equity shares of a company. 34

51 Benefits available to Venture Capital Companies / Funds Under Section 10(23FB) of the Act, all venture capital companies / funds registered with the Securities and Exchange Board of India, subject to the conditions specified, are eligible for exemption from income-tax on all their income, including income from investment in the equity shares of a company. Benefits available to the shareholders under the Wealth Tax Act, 1957 Shares of the Company held by the shareholders will not be treated as an asset within the meaning of section 2(ea) of the Wealth Tax Act, 1957 and hence Wealth Tax will not be applicable. Benefits available to the shareholders under the Gift Tax Act, 1958 Gift of shares of the Company made on or after October 1, 1988 would not be liable to Gift Tax provided the gift is made to related persons. Gift of shares of the company to unrelated persons exceeding Rs. 25,000/- would however be taxed as income in the hands of the recipient as per amendment made by the Finance Act, R. MUGUNTHAN CHENNAI CHARTERED ACCOUNTANT Date: 10/11/2006 Membership No

52 PYRAMID SAIMIRA THEATRE LIMITED SECTION IV: ABOUT US INDUSTRY The following information has been obtained from the public sources specifically mentioned where applicable and has not been independently verified. (Source of information for this section: FICCI & Capital Market, Cinema Systems (Trade magazine)) INTRODUCTION Entertainment is always seen as a major source for leisure, relaxation and information. Improved living standard translates into higher needs for leisure and entertainment. It is also an established fact that entertainment is generally recession proof. The Indian Entertainment industry, which primarily consists of film software, distribution and exhibition, television software and broadcasting, music, radio, is one of India s oldest and prominent industries. INDUSTRY OUTLOOK There are a number of key factors, which make the Indian media and entertainment industry today an attractive proposition. Favorable Indian demographics, growing population, urbanization, rising income and education levels, change in life style, etc have lead to an increased demand for entertainment and the willingness to spend for entertainment has also increased exponentially, besides 1) India s film and television industries are increasingly adopting digital technology. 2) The Government of India is keen to sustain this growth and has positioned itself as a proactive facilitator so that India can be a hub for the 21st century. It is removing barriers to foreign investment, fast tracking procedure and introducing legislation to control piracy and under-declaration. It has granted the film sector industry status and has introduced clean money through state controlled banks. 3) A much needed corporatisation of the industry is beginning to take place with the growth of professional management and accountability and the introduction of insurance and completion bonds. Thus the Indian entertainment industry is witnessing the positive trend due to combination of high technology, efforts of corporatisation, a very large domestic as well as overseas customer base, enhanced income levels and government support. Competition will be another impetus for increased efficiencies and new media such as CAS, DTH and Digital cinema will force the more conventional formats to rethink their strategies. According to FICCI-Ernst & Young report on The entertainment industry, the industry has out-performed the economy in 2003, by growing 15% to Rs.19,200 crore. The entertainment business in India has enormous potential for growth due to to inherent drivers such as growing demand for localized, quality entertainment by a heterogeneous population having varied tastes. The growing disposable income of Indians backed by a desire to spend on entertainment has further spurred this industry. FILM INDUSTRY The film industry is the oldest and the most prominent and popular form of entertainment in India and it is the largest film industry in the world in terms of the number of films produced and admissions each year. (Source: Indian Entertainment Industry Focus 2010: Dreams to Reality, Confederation of Indian Industry - KPMG, 2005 (Source: CII - KPMG Report, 2005) The Indian film industry revenue for 2004 was estimated at Rs crores (USD 1.3 billion), which was less than 1% of global film industry revenue and a fraction of the U.S. film industry revenue, which was US$9.49 billion in 2003 (Source: CII - KPMG Report, 2005) 36

53 The pie chart below sets forth the percentage contribution of various revenue sources to the total revenue of the Indian film industry in Satellite/DTP/IIP-TV 9% Overseas theatrical 12% Music 2% Domestic Theatrical 57% DVD/VCD/Overseas cable 4% Satellite/DTP/IIP-TV Overseas theatrical Music In Cinema Ads 2% Leakages/Piracy In Cinema Ads DVD/VCD/Overseas cable Domestic Theatrical Leakages/Piracy 14% Source: CII-KPMG Report, 2005 The Indian film industry currently realizes almost 70% of its total revenues (around 80% of legitimate revenues) from domestic and overseas box office sales compared with the U.S. film industry, which earns only 35% of its revenue from box office sales and the remaining 65% of revenue is derived from other revenue sources such as sales of DVDs and VHS tapes and the sale of cable and satellite television rights. (Source: CII - KPMG Report, 2005.) Over the last 5-7 years, factors such as strong economic growth, falling interest rates, increased interest in real estate development, increased consumption levels, etc. have resulted in a large boom in the Organized Retail sector in India. A number of large organized retail outlets have been trying to attract large footfalls by building attractive properties such as branded food and apparel outlets as well as theatre chains. The film industry comprises of three sectors: Movie production, which involves making of movies; Movie distribution, which involves the distribution of movies to cinemas, television and video stores; and Movie exhibition, which involves exhibiting the movies in cinemas. Analysis is arranged in the following sections A. Organised Retail in India B. Consumerism and Demographics emergence of middle class as well as tier 2 & 3 towns in India C D E Film and Film production Industry Film distribution industry Film exhibition industry 37

54 PYRAMID SAIMIRA THEATRE LIMITED A. ORGANISED RETAIL IN INDIA In the last 5-7 years we have witnessed a significant growth in organized retail in India. Favorable demographics, rising consumer incomes, real estate developments especially with emergence of new shopping malls, availability of better sourcing options both from within India and overseas, and changing lifestyles bring the Indian consumer closer to the consumers in more developed markets. The diagram below depicts this changing lifestyle: Source: Lifestyle Consumption, Edelweiss Securities Pvt. Ltd INCREASED CONSUMPTION LEVELS OF INDIAN CONSUMERS Over the last few years, there has been a rise in the overall consumption levels of Indian consumers. The key reasons for this growth in Consumption are: (1) The great Indian Middle Class (2) Lower Liquidity Constraints and (3) Favourable demographics are creating a new consumer class (4) Changing lifestyles 38

55 B. CONSUMERISM AND DEMOGRAPHICS The emergence of the Indian middle class with greater earning power and a higher disposable income is one of the key factors that will drive the growth of the Indian entertainment sector. Demographic analysis clearly shows the evidence of this growth. The consumption chart below indicates the continued progression of people into higher income and consumption segments. Rise of India s earning and consuming classes Source: NCAER 2005 A number of economic trends are testimony to this advancement : Automobile sales are rising across the country. In two wheeler sales, India now ranks second in the world, while car sales are over 10 lakhs per annum, growing at about 25 percent annually. India is the sixth largest market for mobile handsets (160 lakh units per annum) and is growing at 50 percent a year The country is the fifth largest market for colour televisions and is growing at 25 percent per annum As the average Indian gets richer and his more compelling needs are met, his propensity to spend on discretionary items such as entertainment increases. Further, as his consumption of various goods and services rises, companies try to reach out to him through more marketing and advertising. Higher demand and an increased investment would result in an expansion of the entertainment industry in the years to come. C. FILM & FILM PRODUCTION INDUSTRY In film making first in the value chain is conception of a story by writers / directors. The next major task lies in the production house that takes care of pre and post production aspects such as dealing with artists, technicians, locations for shooting and editing etc. Distributors have major role in financing films. The production houses sell theatre rights to distributors who in turn earns by ticket sales. The distributor bears the risk of film being a flop or reaps fruits with film being a hit. The distributor takes theatre rights based on territory concept such as Class A, Class B etc. The last in the value chain is theatre owners and they may rent out for a period or enter into agreement for revenue sharing with distributors. 39

56 PYRAMID SAIMIRA THEATRE LIMITED Cinema industry also has undergone a change in culture & taste. Today no film can dream of 300 day run. The shelf life per film has drastically come down. If the film is good then, unfortunately pirated CD market makes sure that it is seen across the entire geography in a very short period. If the film is bad, anyway no body will come to theaters to watch it. Therefore piracy is a lose-lose situation. Film Production Sector The film production industry has been recognized as an industry in the year Since then the film industry has been moving towards corporatization. Corporatization is not only limited to the structural changes involving the emergence of corporations and studios to replace individuals for movie production but also implies a fundamental shift in the way different elements of the film industry, including pre-production, financing, production, post-production and distribution, are managed and run. This is likely to result in a scenario where movie making is governed by transparent and written contracts and is carried out in accordance with global best practices. This should convert the Indian film production industry from an aggregation of creative endeavor to a volume driven business. Corporate tie-ups, sponsorships and merchandising are new trends which help in financing the production of movies in India. Although these sources of finance have been effectively tapped in developed markets such as the United States, they have just emerged as a viable source of finance in India and are likely to play a major part in the future, with producers trying to recover part of their film costs through brand associations. For instance, brands such as Thumsup, Pepsi, Coke and Seagrams now regularly sponsor movies in India. The overseas market (theatrical, video and television) is becoming increasingly lucrative for Indian film productions because of a large and fast growing Indian diaspora, which is estimated at 200 lakh people. Some films are realizing 15-20% of their total proceeds from overseas. (Source: FICCI - EY Report, 2004.) Industry outlook Indian film industry revenues are expected to grow annually at 16% from Rs. 59 billion (USD 1.3 billion) to cross the Rs. 100 billion (USD 2.2 billion) mark by 2007 and reach Rs 143 billion (USD 3.2 billion) in Revenue generation from releases in domestic market is expected to grow annually at 17% from Rs.34 billion (USD 0.75 billion) in 2004 to Rs. 86 crores (US$2.0 billion) in

57 The following factors are expected to be the key drivers of this growth: Movie viewing continuing to remain a very popular source of entertainment. There is currently a lack of readily available alternative entertainment options in India such as theme parks, concerts and gaming and this is not expected to change in the medium term. Continued progression of people into higher income and consumption segments. Favourable demographic changes. Increasing corporatisation of the film production sector should result in an increase in the number of high quality films produced, which should increase demand for movies. In an increasingly corporate environment, unviable movies with weak scripts should find it difficult to garner funding. Consequently, although the average number of films produced annually in India is expected to fall from over 900 in 2004 to around 600 by 2010, the quality of the movies produced is expected to increase. (Source: CII - KPMG Report, 2005.) A significant increase in the number of digital cinemas should also fuel growth of the film exhibition industry in B and C-class centers. D. FILM DISTRIBUTION INDUSTRY: Film Distributors are an important link in the film value chain. Film Distributors buy theatrical distribution rights from Film Producers for exhibiting the films in a defined territory. Film Distributors play various roles including: part-financing of films (in case of minimum guarantee / advance based purchase of movie rights) localized marketing of the film selection of exhibition halls, and managing the logistics of physical prints distribution The Distributors business models include two parts viz. the Revenue Model (Exhibitor - Distributor) and the Cost Model (Distributor Producer). These models are explained below: D1. Revenue Sharing Model (Exhibitor Distributor) The distributor sells the theatrical right of the films to the exhibitor. One of the following four models is normally adopted: a) Theatre Hire Model: The Exhibitor collects the entire box office collections, net of entertainment tax. The Exhibitor retains a fixed amount and hands the balance net collection to the distributor. The entire risk of box office performance of the film is borne by the Distributor. b) Fixed Hire Model: The Distributor receives a fixed amount, from the Exhibitor, irrespective of the Film s performance at the box office. The entire risk of box office performance of the Film is borne by the Exhibitor. c) Minimum Guarantee plus Royalty Model: The Distributor receives a minimum guaranteed amount from the Exhibitor. Collections, in excess of the minimum guaranteed amount is shared between the Distributor and Exhibitor in a pre-agreed ratio. The entire risk of box office performance of the film is borne by the Exhibitor. d) Revenue Share Model: The box office collections, net of entertainment tax, are shared between the Distributor and Exhibitor in a pre-agreed ratio. The risk of box office performance of the Film is shared between the two. In recent past, especially with the advent of multiplexes, the Revenue Share Model is gaining grounds. 41

58 PYRAMID SAIMIRA THEATRE LIMITED D2. Cost Model (Distributor Producer) The key cost elements for a Distributor include cost of acquiring distribution rights, film print (positives / reels used for screening) costs and publicity costs. The Distributor procures domestic/overseas theatrical distribution rights and DVD rights of a film from a Producer for distributing in a specified distribution territory. In the Indian Film Industry, the distribution territories are divided as follows: DOMESTIC Major Areas covered Bombay, Goa Bombay city and suburbs, Thane district, Gujarat, Saurashtra and parts of Maharashtra and Karnataka Delhi-UP Delhi city and suburbs and Uttar Pradesh East Punjab Punjab, Haryana, Himachal Pradesh and Jammu and Kashmir Eastern circuit West Bengal, Bihar, Nepal, Assam and Orissa Central Province, Central India & Rajasthan Rajasthan and parts of Madhya Pradesh and Maharashtra South Andhra Pradesh, Tamil Nadu, Kerela and parts of Maharashtra and Karnataka INTERNATIONAL USA, UK and the rest of the world D3. Revenue Sharing Model (Distributor Producer) There are three types of Distributor Producer revenue sharing models, which are summarized below: a) Minimum Guarantee plus Royalty Model: The Distributor acquires the right to distribute a film in a particular territory, for a limited period, by paying a minimum guarantee to the Producer. The excess of Distributor revenues over the minimum guarantee, print & publicity costs and distributor s commission is called Overflow. The Distributor shares the Overflow with the Producer in a pre-agreed ratio. b) Commission Model: The Distributor retains a Commission on the total amount collected from the Exhibitor, and remits the rest to the Producer. The Distributor may pay a recoverable advance to the Producer, while acquiring the distribution rights. Such advance is usually adjusted against the remittances to be made to the Producer. The Distributor does not bear any risk of the box office collections. c) Outright Sale Model: The Distributor purchases the entire rights for the territory from the Producer. E. EXHIBITION INDUSTRY The Exhibition industry consists of basically theatres. However other forms of exhibition include school auditoriums, pre-show displays, video parlours, etc. Currently there are over 100,000 cinema screens world-wide with about 6000 new screens replaced / added per annum. India s screen density is very low. A combination of highly fragmented ownership, high entertainment tax rates, large cost of setting up new theatres, and unavailability of organized funding has resulted in many such theatres not being able to continuously upgrade or renovate their facilities, thus resulting in a decline in the quality of such theatres. With around 12,900 active screens (down from 13,000 in 1990) out of which over 95% are standalone single screens,. In contrast, China, which produces far less films than India, has 65,000 screens while US has 36,000. There is a need for at least 20,000 screens in India as against the current 12,900. (Source: CII-KPMG Report, 2005). 42

59 Screen per million populationthe following table will illustrate Cinema spending per head of population. It may UK Belgium Germany Spain Italy Ireland Denmark France US India be observed that India is at the bottom of the table which also shows the dormant potential for these exhibition segments once accessibility, quality of service and of course new content issues are addressed. Cinema spending per head of population 2003 $ USA Singapore Hong Kong EU average Korea, Rep Taiwan Mexico 3.99 Thailand 1.47 South Africa 1.36 Russia 1.28 Turkey 1.03 Malaysia 1.01 India 0.59 Egypt 0.20 China

60 PYRAMID SAIMIRA THEATRE LIMITED Geographic distribution of theaters across India Distribution of Theatres Others 24% Andhrapradesh 21% Tamil Nadu 19% Kerala 10% Karnataka 9% Uttarpradesh 8% Maharashtra 9% Source: The Indian Entertainment Industry: Emerging Trends & Opportunities FICCI E&Y Report, 2004 The Southern Indian states of Tamil Nadu, Karnataka, Kerala and Andhra Pradesh account for 59% of the number of theatres in India, while servicing 22% of the Indian population. As a result, the rest of India is significantly underscreened in comparison to the national average. This also reflects appetite for films in South India. Box office Revenue: The total revenue of the Indian Film Industry in 2003 is estimated at Rs. 4,500 crores. Going forward, with improvement in distribution, exhibition infrastructure, advent of digital cinema and better exploitation of films, the Indian Film Industry is likely to grow at a CAGR of 18% to gross Rs. 10,100 crores by Source: The Indian Entertainment Industry: Emerging Trends & Opportunities FICCI E&Y Report, 2004 FILM INDUSTRY: GOVERNMENT POLICY & REGULATIONS The major impediment to the industry is the higher rate of entertainment tax levied by the respective state government. For instance, in Bihar the tax rates were 110% of the basic admission rates, in Delhi, it ranges from 40% to 60% on basic admission rates. In West Bengal, the rates are classified as per the language of the movie, say, 70% for Hindi films and 20% for Bengali films. Fortunately in Tamil Nadu, the Government has drastically reduced the Entertainment Tax rate to an average rate of only 12.5% and also has removed the compound tax. Next setback to industry is piracy, whether it may be of cable or CD form and it is estimated that 20% of the revenue is taken away due to piracy. CONCLUSION The Indian Entertainment Industry is in an enviable position it operates within a robust macro economic framework and the Indian creative product is fast becoming a global power-brand. The domestic scenario is bursting with prospects and the industry seems ideally positioned to capitalize on them. With its increasing focus on organized and innovative delivery mechanisms, the industry is setting higher standards for itself and for its deliverables to the end consumer. 44

61 OUR BUSINESS OVERVIEW We have been engaged in the production of films and have produced 10 films since inception. We have taken a strategic decision to concentrate on the film distribution and exhibition sectors. We aim to carve a unique space in mass content distribution using the theatre infrastructure to deliver education, entertainment and information at an affordable cost to all sections of the society. To achieve this objective, we are in the process of implementing an infrastructure project in the film exhibition sector by creating a nationwide chain of theatres under our management and operational control. Through this, we have evolved into a theatre chain company, integrating the last mile access platform for content delivery. We have christened our project as the Mega Digital Theatre Chain. We launched the project in November THE MEGA DIGITAL THEATRE CHAIN PROJECT We are currently engaged in the business of film exhibition. We are a Theatre Chain company having presence in all categories of theatres including Mall, Multiplexes, Cine-plexes and Standalone Theatres. We have been acquiring theatres on long term leases and improving their infrastructure to bring it on par with modern standards to offer a high quality viewing experience. We are in the process of establishing an integrated Network Operating Center (NOC) which will convert films into digital formats and transmit these films using satellites to various theatres in our chain across India in a secured encryption mode. Using Digital Rights Management [ DRM ] we will exhibit films and other content in digital mode without physical film prints. This will save Rs.60,000 Rs.70,000 per movie per theatre and approximately save Rs lakhs per theatre per annum. Our project entails the conversion of existing theatres into digital theatres. This conversion will take place in all theatres in our chain including those situtated in Class B & C centers. This will enable the simultaneous release of new films at these centers too, without the cost implications of physical film prints. This will also help to combat the problem of piracy of films as new films can be released across many places simultaneously, which are not the case today. Digital theatres will also function as the delivery medium for other entertainment content, as well as educational centers by incorporating features and services such as video conferencing, virtual class rooms etc. We will be able to exhibit live sports events, conduct educational and refresher courses and conduct examinations in these theatres. We aim to implement a standardized system for process management for the exhibition industry. The digitalization and centralization of exhibition facilities will be offered as outsourced services to other theatre chains. RATIONALE OF THE PROJECT: The following are major pain points in exhibition sector : The cycle of low occupancy levels and loss of revenue is on account of the following factors: Piracy Supply side problems & high variable cost of film prints. New films not available in nearby theatres. 20% of the film collects 80% of the revenue & ultimately results in stand alone theatres inability to aggregate good content consistently at the right prices. Poor quality of theatrical infrastructure & poor quality of service due to lack of inclination and ability of single screen owners to invest in infrastructural and qualitative improvements; unhygienic conditions, poor seating, outdated equipment & poor quality of food and beverage offerings.. Our Company proposes to addresse the above issue in the following manner: Remove the existing dis-incentives associated with theatres by improving the quality of infrastructure Remove the barriers of investment, infrastructural knowledge & negotiation caused by theatres being owned by single investors and more importantly managed also on Stand Alone basis, by acquiring theatres on lease and 45

62 PYRAMID SAIMIRA THEATRE LIMITED integrate them into a national chain of theatres under our management. This will separate management from ownership on a professional note, in a manner similar to the hospitality industry. Create a vertically integrated theatre chain by moving a step up the value chain and taking over the responsibility of distribution of films. This will create a content supply chain through agglomeration of content and the elimination of intermediaries. Recognize the current reality of, low shelf life of films and therefore make a carpet release of new films by Introducing digital distribution and increasing the number of simulataneous exhibition points while avoiding print and other costs associated with traditional methods of film releases. Digitalizing exhibition by installing digital projectors and digital sound systems to offer a high quality viewing experience. Use our theatre infrastructure & locations to create multiple service pulls and become an infrastructure and service facility provider for organized retail industry. Improve & structure new revenue streams like advertisements, live events, interactive content, educational content, cross packaging, etc Build an aspirational brand The aforementioned acts would lead to: Creation of large enterntainment and retail hubs with large footfalls Last mile agglomeration which can deliver an experience both in services as well as products Leverageable centrally located infrastructure with brand identification and recall. Pull across major consumption centres in Tier I, II & III locations. COLLABORATIONS / TIE-UPS CONTENT PROCUREMENT CONTENT CONVERSION CONTENT DISTRIBUTION SERVER & PLAY OUT PROJECTORS SERVICE PROVIDER Leading production houses in South India have agreed to provide new contents for digital mode distribution. Some of the production houses are listed below:avm Productions Lakshmi Movie MakersKavithalayaa Productions Vasan BrothersSathya Jyothi Films Popular FilmsSivasri Pictures Sri Surya MoviesSuper Good Films (P) Ltd. GV Films Ltd.Vaigai Cine Arts Sri Mahalakshmi CombinesWe have received written commitments from each of the parties mentioned above. For further details, please refer to page no. 64 We have an arrangement with Prasad Corporation Pvt. Ltd. for setting up of a Telecine at Chennai and conversion of traditional film to HD digital format. We have entered into an agreement dated 22/08/2004 with Tatanet Ltd. (erstwhile Nelco Ltd.) for the provision of turn key connectivity & Bandwidth and to link our NOC with theatres on a Closed User Group Network. We have entered into an agreement dated 06/04/2005 with Real Image Technologies Pvt. Ltd. for the provision of servers for digital playout systems. We have entered into an agreement dated 12/04/2005 with Bharat Digitals Ltd. for the development, manufacture and supply of digital projectors according to our specification. We have entered into an agreement dated 20/04/2006 with Valuable Media Pvt. Ltd. for installation of digital cinema systems which includes, digital projectors, servers, and communication system, on a pay-per-use basis. 46

63 THEATRE / MULTIPLEX 1] We have entered into individual, long term, lease / revenue sharing MANAGEMENT agreements with theatre owners in the state of Tamil Nadu for the exclusive rights for the management of their theatres, details of which are given from the following page. 2] We have entered into an agreement dated 08/07/2006 with Spirit Global Constructions Pvt. Ltd. for 60 malls with multiplexes that Spirit is developing in the states of Punjab and Himachal Pradesh. The brief terms of this agreement are laid out on page 51 of this Red Herring Prospectus. 3] We have entered into an agreement dated 07/09/2006 with Swatantra Land & Finance Ltd. for 22 malls in the state of Haryana and 20 malls in the State of Rajasthan. The brief terms of this agreement are laid out on page 51 of this Red Herring Prospectus. The following matrix details the list of existing theatres which we have tied up as part of our theatre chain. It also provides details on the number of screens and seats in each theatre as well the split between auditorium space and free space available at each location: THEATRE MATRIX CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT. COIMBATORE REGION A Coimbatore The New Karnatic Talkies 1 31/12/ ,000 7,000 27% 19,000 73% A Coimbatore K G Complex 4 18/05/2006 2,989 30,000 12,000 40% 18,000 60% A Gopichettipalayam Shanthi 1 18/10/ ,340 4,000 14% 24,340 86% A Pollachi R.R. 1 14/10/ ,132 5,000 31% 11,132 69% A Pollachi Om Prakash 1 8/11/ ,150 6,050 25% 18,100 75% A Pulliampatti Shanmuga 1 15/10/ ,400 5, % 0 0% A Singanallur Jai Shanthi 1 12/7/2005 1,052 46,652 30,520 65% 16,132 35% A Singanallur Sri Venkatesa 1 1/1/ ,288 5,800 23% 19,488 77% A Sundarapuram - Cbe Palaniappa 1 1/9/ ,160 6,000 23% 20,160 77% A Thirupur M P S 1 17/10/ ,200 6,720 29% 16,480 71% A Thirupur Prakash 1 17/10/ ,570 6,120 39% 9,450 61% A Thirupur Ram Lakshman 1 25/10/ ,112 4,935 35% 9,177 65% A Udumalpet Kalpana 1 1/6/ ,880 6,469 19% 28,411 81% A Vadavalli Sri Ram 1 12/7/ ,000 6,000 29% 15,000 71% B Ammapettai Sri Murugan 1 21/01/ ,254 5, % 0 0% B Anthiyur Sellakumara 1 4/11/ ,080 23,982 82% 5,098 18% B Avinashi Chitralaya 1 8/6/ ,000 5,400 26% 15,600 74% B Dharapuram Vasantha 1 10/3/ ,000 2,000 11% 16,000 89% B Edayarpalayam Krithiga 1 1/9/ ,880 6,760 19% 28,120 81% B Kamnknplym Saradha 1 6/11/ ,520 4,500 15% 26,020 85% B Kangayam Swargam 1 10/1/ ,560 4, % 0 0% B Kangayam Senniappa 1 1/6/ ,160 10,500 40% 15,660 60% B Karattadipalayam Jaya Maruthi 1 1/5/ ,500 9,270 21% 34,230 79% B Kottur Malaiyandipuram Sri Ram Murugn 1 11/6/ ,400 6,000 7% 80,400 93% B Kurichi Padmanabha 1 16/10/ ,890 14,628 64% 8,262 36% B Palladam Sabari 1 6/11/ ,340 2,800 10% 25,540 90% B Perumanallur Sree Bhuvanam 1 12/7/ ,915 3,360 18% 15,555 82% B Perunthozhuvu Sri Shanthi 1 1/2/ ,880 7,200 21% 27,680 79% B Sirumugai V.N.K 1 12/7/ ,600 6,050 57% 4,550 43% B Sirumugai Mahalakshmi 1 12/7/ ,500 9,730 40% 14,770 60% B Vellakoil Sriveerakumar 1 5/11/ ,537 7,106 25% 21,431 75% B Vellakoil Manivel 1 28/11/ ,524 9,000 19% 38,524 81% B Vellakoil Karmegam 1 28/11/ ,302 4,050 15% 23,252 85% B Vettaikaranpudur Shenbaga 1 22/11/ ,000 5,000 83% 1,000 17% TOTAL 37 24, , , ,990 47

64 PYRAMID SAIMIRA THEATRE LIMITED CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT. MADURAI REGION A Aruppukottai The Tamilmani 1 11/10/ ,100 6,875 24% 22,225 76% A Bodinayakkanur Meenakshi 1 10/10/ ,100 16,700 67% 8,400 33% A Dindugal Shan 1 10/8/ ,169 14,850 53% 13,319 47% A Dindugal Naga & Lakshmi 2 23/11/2005 1,470 43,600 18,050 41% 25,550 59% A Madurai Alankar 1 23/11/2005 1,071 15,000 8,148 54% 6,852 46% A Madurai Sakthi A/C Sivam Complex 1 12/1/2006 1,050 15,000 7,200 48% 7,800 52% A Madurai Chinthamani 1 10/2/2006 1,010 21,000 9,600 46% 11,400 54% A Madurai Cinepriya 1 10/2/2006 1,104 19,000 12,000 63% 7,000 37% A Madurai Natana, Natiya, Narthana 3 16/11/2006 1,820 23,000 19,000 83% 4,000 17% A Virudhunagar Amirtraj 1 30/09/ ,730 4,839 17% 22,891 83% B Bathala Gundu Parimalam 1 19/10/ ,420 24,069 58% 17,351 42% B Chinnalapatti Om Sri Lakshmi 1 27/01/ ,000 2,000 11% 16,000 89% B Cumbam Devabala / Sakthibala 2 10/1/2006 1,216 43,124 0% 43, % B Sivagangai Vasantham 1 11/10/ ,000 9,000 56% 7,000 44% B Thirumangalam Banu 1 10/10/ ,980 3, % 0 0% B Usilampatti Kannan 1 10/7/ ,800 4,000 18% 17,800 82% TOTAL 20 15, , , ,712 CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT SALEM REGION A Salem Rajeswari 1 1/11/ ,200 19, % 0 0% A Salem Arrs Multiplex 1 1/1/ ,000 14,400 28% 36,600 72% B Ammapattai Srinivasa 1 13/01/ ,250 6,680 35% 12,570 65% B Ammapattai Sri Saraswathi 1 13/01/ ,200 12,410 47% 13,790 53% B Bargur-Krishnagiri Duraisamy Paradise 1 2/11/ ,000 5,000 26% 14,000 74% B Bommudi-Dharmapuri Sri Palaniyappa 1 31/03/ ,500 8,000 37% 13,500 63% B Harur Dass 1 17/10/ ,000 11,076 37% 18,924 63% B Kariamangalam Sri Bagyalkshmi 1 11/2/ ,700 21,800 67% 10,900 33% B Kolathur - Salem Shanthi 1 18/02/ ,000 3,200 18% 14,800 82% B Malla Samuthram Arunachalam 1 1/3/ ,965 10,933 21% 40,032 79% B Mettur Dam Karpagam 1 12/10/ ,000 8,778 40% 13,222 60% B Mettur Dam Lakshmi 1 24/01/ ,000 5,000 19% 21,000 81% B Mettur Dam Mtc Annai Kaveri 1 24/01/ ,000 4,500 24% 14,500 76% B Namakkal Jothi 1 4/11/ ,000 30,000 56% 24,000 44% B Omalur Jaya 1 22/10/ ,208 5, % 0 0% B Rasipuram Sri Devi 1 11/11/ ,000 6,000 25% 18,000 75% B Thiruchencode Deivam 1 1/9/ ,700 17,000 52% 15,700 48% TOTAL 17 10, , , ,538 48

65 CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT TIRUNELVELI AND KANYAKUMARI REGION A Kadayanallur Maharaja 1 24/01/ , % 22,400 97% A Senkottai Kaleeswari 1 24/10/ ,600 7,590 35% 14,010 65% A Tuticorin Ksps Ganapathy 1 20/10/ ,000 5,000 28% 13,000 72% B Alangulam Sri Lakshmi Narayanan 1 27/01/ ,192 5,022 9% 51,170 91% B Arumuganeri Sri Santhi 1 19/11/ ,600 4,503 20% 18,097 80% B Avudayanoor Sri Ratna 1 27/01/ ,235 7,150 31% 16,085 69% B Kalakadu Hema Talkies 1 27/10/ ,228 5,253 12% 36,975 88% B Kovilpatti Shanmugha 1 21/11/ ,932 7,000 18% 30,932 82% B Naynaragaram Ganesh 1 24/01/ ,236 3,845 17% 18,391 83% B Sambavar Vadakarai Seethalakshmi 1 22/02/ ,000 2,800 23% 9,200 77% B Sankarankoil Gowri Shankar 1 29/05/ ,000 4,500 24% 14,500 76% B Senkottai Anand 1 11/11/ ,515 5,665 60% 3,850 40% B Surandai Kavitha 1 25/10/ ,956 9,000 29% 21,956 71% B Udangudi Ayyanar Thiriarangam 1 27/10/ ,700 6, % 0 0% B Valliour Sri Arunatakies 1 25/10/ ,240 6,148 16% 33,092 84% B Valliour Chitra 1 19/11/ ,250 5,406 20% 21,844 80% TOTAL 16 8, ,784 86, ,502 CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT NSC REGION A Ambur Ramu 1 17/05/ ,000 6,000 27% 16,000 73% A Neyveli Sri Ranga Theatre 1 30/12/ ,296 8,002 13% 51,294 87% A Pondicherry Rukmani 1 31/05/ ,800 9,000 61% 5,800 39% A Pondicherry Jeeva 1 31/05/ ,800 6,000 41% 8,800 59% A Thiruvannamalai Hari Haran 1 16/06/ ,000 5,000 50% 5,000 50% A Vellore Apsara 1 11/3/ ,000 15,824 61% 10,176 39% A Vellore Gowri Prabha 1 17/05/ ,000 2,800 18% 13,200 83% B Arni Karthikeyan 1 1/1/ ,754 12,000 45% 14,754 55% B Jolerpet Kkc 1 24/05/ ,000 4,500 21% 16,500 79% B Kalavai Sri Murugan 1 11/8/ ,393 10,120 70% 4,273 30% B Vaniyambadi Sangeetha 1 18/05/ ,000 3,200 18% 14,800 82% B Vaniyambadi Sivaji 1 8/6/ , % 24,653 96% B Vaniyambadi Vijay 1 8/6/ ,607 4,500 23% 15,107 77% TOTAL 13 6, ,270 87, ,357 CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT TRICHY TANJAVUR REGION A Pattukottai Neela 1 29/05/ ,000 4,500 21% 16,500 79% A Thanjavur Parveen 1 14/11/ ,000 7,000 39% 11,000 61% B Swamymalai Sri Murugan 1 17/05/ ,650 8, % 0 0% TOTAL 3 1,921 47,650 20,150 27,500 CATEGORY PLACE NAME OF NO. OF DATE OF NO. OF TOTAL AUDITORIUM OPEN SPACE THEATRE SCREENS MOU SEATS SQ.FT CHENNAI REGION A Chennai Abirami 4 12/5/2006 2,113 25,000 11,200 45% 13,800 55% TOTAL 4 2,113 25,000 11,200 45% 13,800 55% 49

66 PYRAMID SAIMIRA THEATRE LIMITED ANDHRA PRADESH REGION CATEGORY PLACE NAME OF THEATRE NO. OF DATE OF NO. OF SCREENS MoU SEATS ADILABAD A Adilabad Nataraj Delux 1 11/11/ A Adilabad Nataraj 70 Mm 1 11/11/ KHAMMAM A Khammam Sundar Max 1 11/11/ B Madhira Santhi Dts 1 11/11/ B Yellandu Lalith Kala Mandir 1 11/11/ B Palvoncha Venugopal 1 11/11/ B Sattupally Venkateswara Talkies 1 11/11/ KARIMNAGAR A Karimnagar Raja Deluxe 1 11/11/ B Jagtial Durga Raja 1 11/11/ B Huzoorabad Annapurna Deluxe 1 11/11/ B Jammikunta Annapurna Dts 1 11/11/ B Peddapally Srinivasa Dts 1 11/11/ B Vemulawada Gokul Talkies 1 11/11/ MEDAK B Sangareddy Nataraj 1 11/11/ B Siddipet Venkateswara Theatre 1 11/11/ MAHABUBNAGAR A Mahabubnagar Balaji 1 11/11/ B Achampet Satyalaxmi 1 11/11/ NIZAMABAD A Nizamabad Tirumala 1 11/11/ B Kamareddy Naaz Deluxe 1 11/11/ NALGONDA A Nakirekal Raghu Rama Talkies 1 11/11/ A Nalgonda New Prem 1 11/11/ B Huzoornagar Srinivasa Theatre 1 11/11/ B Kodada Shakuntala P. Palace 1 11/11/ B Suryapeta Ramalingeswara 1 11/11/ B Tirumalaghiri Malleswari 1 11/11/ WARANGAL A Warangal Kakateeya 3 11/11/2006 1,800 KARNATAKA B Mahabubabad Laxmi 1 11/11/ B Mahabubabad Venkatrama 1 11/11/ B Torrur Ashwini 1 11/11/ B Torrur Venkateswara Talkies 1 11/11/ B Narasampet Jayasri 1 11/11/ B Janagoan Devi 70mm 1 11/11/ TOTAL 34 18,830 REGION CATEGORY PLACE NAME OF THEATRE NO. OF DATE OF NO. OF SCREENS MoU SEATS A Bagalkot Sri Vasavi 1 15/11/ A Belgaum Ritz Sri Krishna 1 17/11/ B Banahath Shringar Theatre 1 15/11/ B Ranebennur Veena Chitramandir 1 15/11/ TOTAL 4 2,520 Note: The area available (in sq. ft.) to PSTL is yet to be finalized for the theatres in Andhra Pradesh and Karnataka. 50

67 In all as on the date of filing of this Prospectus, we have tied up a total of 148 screens of existing theatres in the states of Tamil Nadu, Andhra Pradesh and Karnataka. The combined number of seats available across the theatres in our chain in these three states is 90,906. In addition to the exhibition business, we have also tied up rights to use the open area available in these theatres for the purpose of establishing food and beverage outlets (food courts, restaurants, etc.), retail outlets, parking areas, and other entertainment facilities such as children s area, electronic entertainment arcade, etc. Agreements with Spirit Global Constructions Pvt. Ltd. and Swatantra Land and Finance Ltd. In order to expand our footprint to other states in India, we have entered into agreements with reputed developers like Spirit Global Constructions Pvt. Ltd. and Swatantra Land and Finance Ltd. for the development of malls with multiplexes in the northern Indian states. Brief terms of these agreements are as follows: Spirit Global Constructions Pvt. Ltd. [ SPIRIT ]: We have entered into an agreement with Spirit dated 08/07/2006. Under the terms of this agreement, Spirit will construct 60 malls with multiplexes in the states of Punjab and Himachal Pradesh in locations which will be approved by our Company. On completion of construction of each mall, PSTL will take over the entire mall including the screens, retail space, food courts and entertainment areas on a ten year lease, which is renewable upto a period of 25 years. As per this agreement, PSTL will pay a fixed lease per month to Spirit and will manage the entire operations of the 60 malls. The ten year lease period will be exclusive to each mall and will commence from the day of handover of the completed mall to PSTL. The locations for the mall to be constructed under this agreement are in the process of being identified. Swatantra Land and Finance Ltd. [ SLFL ] We have entered into an agreement dated 07/09/2006 with SLFL. This is a walk-in agreement wherein, PSTL will takeover the management and operations of 22 malls in Haryana and 20 malls in Rajasthan. The malls will be fully complete with all the facilities such as multiplex screens, food courts, entertainment zones, retail space, parking space, etc. as per our specifications. The location of each mall will be approved by our Company in the centres mentioned below: HARYANA RAJASTHAN CATEGORY PLACE STATUS OF LAND CATEGORY PLACE STATUS OF LAND ACQUISITION ACQUISITION A Ambala To be identified A Jaipur To be identified A Bahadurgarh To be identified A Jodhpur To be identified A Dharuhera Complete A Udaipur To be identified A Faridabad Complete B Ajmer To be identified A Gurgaon To be identified B Alwar To be identified A Karnal Complete B Bharatpur To be identified A Karukshetra To be identified B Bhilwara To be identified A Panchkula Complete B Bhiwadi Complete A Panipet To be identified B Bikaner To be identified A Rohtak To be identified B Chittourgarh To be identified A Sonepat To be identified B Jagn-Kota Road To be identified B Agroha To be identified B Jaisalmer To be identified B Bhiwani To be identified B Jhalore To be identified B Chakri Dadri To be identified B Kishangarh To be identified B Hansi To be identified B Kota To be identified B Hissar To be identified B Mount Abu To be identified B Jajjhar To be identified B Pholera To be identified B Jind To be identified B Pushker To be identified B Palwal To be identified B Ranakpur To be identified B Rewari To be identified B Sawai-Madhopur To be identified B Sirsa To be identified 51

68 PYRAMID SAIMIRA THEATRE LIMITED BUSINESS STRATEGY The first and foremost strategy of the our company is to create a pan India theatre chain. The second step is to convert the existing methods of exhibiting content into the digital form and then distribute content through digital distribution media. To achieve this we propose to take over the management of the distribution and exhibition of film and other audio visual content as well as operate and manage the physical locations used to exhibit the content. Through this we will evolve into a multifaceted theatre chain company with expertise in mall and multiplex management. THEATRE MANAGEMENT PSTL will provide update the facilities, amentities and ambience at all theatres in our chain to bring them at par with modern consumer expectation levels. All the theatres will have certain basic features like quality seating, modern sound and lighting equipment, good house keeping, proper parking, good food and beverage facilities, fire control and safety features, etc.. Many theatres will have additional facilities. Seating Seating in the theatres is unique from other traditional theatres. Larger leg space Couple seating (two seats in a separate bay), Family seating (four or five seats in a bay) Food table for each bay Wider arm rests Comfortable neck rests Full push back seats Customized seats for the physically handicapped. Housekeeping Proper Housekeeping to ensure hygiene and cleanliness with trained Housekeeper. Clean & hygienic washroom with proper facilities. First-Aid equipments in the premises to ensure attention to medical emergencies Food & Beverages (F&B) F & B is a major source of income in Cinema other than ticket sales. PSTL plans to tie up with major food chains to offer multi variety fare. These food outlets will serve general public also. Food will also be offered as a package along with Transportation & Ticket. Special food like Health / Diabetic food will also be available. Parking Integrated parking management is planned. Valet parking will also be available. Car park/ two wheeler parking will have tie-up for general water wash & service. Transportation One of the major issues for theatre is access and lack of affordable transportation facilities. PSTL will tie up transportation facilities like Cabs, Auto, Share Vans etc along with ticket sale. Coming to PSTL theatre chain should be a pleasurable experience. Kids Corner The theatre chain will have a professionally run Child Care center along with Kids play area. Trained staff will be there to feed the children also. Women can safely leave their kids in this place and enjoy film without worrying about their kids. 52

69 Other Services Cloak room / locker facilities where one can keep their luggage Bank ATM s, Cheque drop collection boxes, credit card collections, Internet banking terminals. Courier Agency, Post Box. Browsing / Computer/ Business Center with Video Conferencing. STD/ISD/ fax receiving & sending. Gaming Centers Complaint centers for Cable TV/ Utilities Financial services selling centers Tele Shopping counters Other Features High Quality Lighting Good Air Conditioning Exhaust Fans Standby Pedestal Fans Cleary marked Floor Plan Lobby/ Lounge Fountain Water Outlets Decorated Sidewalls Customer Service Customer satisfaction is another key factor in the Pyramid-Saimira Theatres. Complaints will be attended and rectified at once. Complaint / Suggestions book will be prominently placed. Customer Service will be ensured for the audience right from the booking of the ticket till he leaves the theatre after the show. Security All statutory guidelines will be adhered to in letter & sprit. Metal Detectors will be placed in the auditorium to ensure proper security. There will be proper Fire-fighting equipments & Smoke-alarms. Emergency Exits will be marked and lighted properly. Baggage Checking will be done. ADVANTAGES OF DIGITAL CINEMA Parallell to the creation of our theatre chain, we propose to install digital exhibition equipment such as digital projector, networked servers and communication equipment at each of the theatres. By this each of the theatres becomes part of a Closed User Group [ CUG ]network. This will enable simultaneous delivery of content to these theatres using satellites or bradband networks. The following are the advantages of Digitilisation: First, the high cost of film prints (Rs 60,000/print for a conventional release) is avoided. By avoiding the high cost of prints, which can be anywhere from 15 to 20 percent of a film s production budget, a much wider release would be possible. Considerable handling costs to get the bulky film prints from the lab to the theatres and back after the run are also avoided. No need to be concerned about disposal of the old prints. Response to demand can be much more efficient. Producers and distributors would not have to guess how a film is likely to fare in order to decide how many prints to make. A small movie can be released in a small number of theatres and if it becomes popular, the number of theatres can be increased very quickly. No worry about courier services not getting the films to the theatres in time for opening day. 53

70 PYRAMID SAIMIRA THEATRE LIMITED Prints can disappear only to show up in hundreds of bootleg copies in the streets. No multiple inventory problems for various sound formats or foreign language releases. Film s quality does not deteriorate with age unlike celluloid, which becomes scratched and sprocket cut, especially with the older projectors used in India. Quality of the presentation is consistent from show to show & every show of a movie is as good as the premiere. Playback system could allow accurate and secure reporting of playback details to ensure that no unauthorized screenings are shown. Threat of piracy could be reduced, as the media would be highly encrypted. ADVANTAGES OF DIGITAL THEATERS Digital system will extend the presentation capabilities beyond just showing movies. Special showings of live events and other programmes open up many new entertainment venues for the theatre segment. The large-screen experience offers an unmatched capability for viewing such non-traditional programming and could bring significant new revenue to theatres over time. Digital system makes screen scheduling easy, accurate, and flexible for the theatre operation like a movie can be scheduled to show at a certain time in a given auditorium and with a defined set of trailers and promotions, which can be changed at each show time. This provides more efficient theatre operation management. Better Reporting and Tie-in to Concessions, Ticketing, Marquees, and Promotions. Theatre management will have unprecedented ability to monitor and track all aspects of theatre operation. Once the Digital Cinema system is tied-in to other theatre operations, comprehensive control and reporting of ticketing, concessions, marquees, environmental controls and promotions are all possible from both the local theatre and/or centralized theatre centers. Smaller Theatres are Cost Effective due to Low Distribution Costs. Automatic Diagnostics: The Digital Cinema system will monitor its own operation and will include fault-tolerant design. This allows the system to not only detect failures in equipment and report these failures for maintenance activity, but also allows the presentations to go on uninterrupted during most failure events. Equipments will perform self-calibration to maintain consistently high presentation quality. The show must go on and with the Digital Cinema system it will! DETAILS OF BUSINESS MODEL Our Business Model consists of the following distinct business propositions-: 1. Creation of a Mega Theatrical Chain with management and operational control of exhibition locations 2. Content Agglomeration 3. Application & Outsourcing of Technical Services Each of these services constitutes separate Strategic Business Units (SBU). Though these services will now be under one organizational banner, they will operate on strict profit center basis. Ultimately these distinct services will be spanned off into separate Organizational Units and each of these units need not limit the service to in-house alone. Each of these SBU will expand their sphere of market independently and will also be located based on the needs & imperatives of the respective business. 54

71 1. CREATING A MEGA THEATRICAL CHAIN WITH MANAGEMENT AND OPERATIONAL CONTROL OF EXHIBITION LOCATIONS 1.1 Business Process Our aim of establishing a theatrical chain is that the exhibition industry should move towards separation of ownership and management. The chain can be built by a combination of the following methods:- a. Outright Purchase of Theatres: - This will be resorted to only very sparsely, since the focus is in creating of chain and not owning Real Estate. However our company proposes to create a secondary market for Theatrical real estate by sale and lease back method. b. Long term Full Lease of theatres: -. In this method, our company will take on lease the theatre as is where is basis and invest in up-gradation of the physical infrastructure as well as digital conversion in the theatre. This method will be the one more frequently applied in the first phase of operation. We have focused on using this model to tie up the theatres forming part of our theatre chain as it is comparatively less capital intensive to an outright purchase. c. Theatres On Revenue Share / Franchisee basis: - In this method existing theatre owners will invest in up-gradation of infrastructure to company s specification. The company will invest in Digital conversion and take over content management / exhibition management & facilities management. The theatre owner will get a share of revenue generated in that theatre. 1.2 Revenue Ticket sales revenue for the film shows Revenue share from various facilities and service providers for the food courts, childrens entertainment facilities, etc Revenue from the leasing of retail space in the theatres and malls. Revenue from advertising during shows, in the lobbies & hoardings on the property. 1.3 Cost Payment to theatre owners either as fixed rental or on a revenue share basis Payment to service providers for the digital cinema equipment and associated services VALUE ADDED FACILITIES We will provide a modern ambience in the theatres in our chain. These theatres will have certain basic comfort features like quality seating, good house keeping, proper parking, good fire control & safety features etc. Many theatres will have additional facilities depending on the cities in which they are located like high end shopping outlets, children s entertainment facilities, escalators, etc. Seating Seating in the Theatres is going to be the unique from other traditional theatres. Larger leg space Seats for a couple (Two-seats in a cozy bay), for a small family (Four or Five Seats in a bay) Food Table for each bay Wider Arm rest Cozy neck rest Fullest Pushback seats Cozy cushion Designer Seats for physically handicapped. 55

72 PYRAMID SAIMIRA THEATRE LIMITED Housekeeping Proper Housekeeping to ensure hygiene and cleanliness with trained Housekeeper. Clean & hygienic washroom with proper facilities. First-Aid equipments in the premises to ensure attention to medical emergencies Food & Beverages (F&B) F & B is a major source of income in Cinema other than ticket sales. PSTL plans to tie up with major food chains to offer multi variety fare. These food outlets will serve general public also. Food will also be offered as a package along with Transportation & Ticket. Special food like Health / Diabetic food will also be available. Parking Integrated parking management is planned. Valet parking will also be available. Car park/ two wheeler parking will have tie-up for general water wash & service. Transportation One of the major issues for theatre is access and lack of affordable transportation facilities. PSTL will offer transportation facilities like taxi cabs, auto rickshaws, shared transportation etc. at the time of slae of tickets. Children s Facilities The theatre chain will have a professionally run Child Care center along with kids play area. Trained staff will be there to take care of the children s nutritional requirements. Families can safely leave their children in this place and enjoy film without worry. Other Services Cloak room / locker facilities where one can keep their luggage Bank ATM s, Cheque drop collection boxes, credit card collections, Internet banking terminals. Courier Agency, Post Box. Browsing / Computer/ Business Center with Video Conferencing. STD/ISD/ fax receiving & sending. Gaming Centers Complaint centers for Cable TV/ Utilities Financial services selling centers Tele Shopping counters Other Features High Quality Lighting Good Air Conditioning Exhaust Fans Standby Pedestal Fans Cleary marked Floor Plan Lobby/ Lounge Fountain Water Outlets Decorated Sidewalls 56

73 2. CONTENT AGGLOMERATION 2.1 Business Process We will agglomerate content and maintain a digital library. This will enable us to play out any type of content to any theatre in the chain. The content will include:- New films of various languages Old films which continue to enjoy high demand Films for chuildren Non film content like sports events Educational content 2.2 Revenue Revenue Share of Gate Collection from Theatres / from Theatre Chain SBU Sale / Rent / Royalty / Lease of content to other segments like Broadband, Satellite, DVD etc 2.3 Cost Payment to Content owners for rights either on Outright or as Share of Revenue collection dasis Payment to NTASP CONTENT ACQUISITION PROCESS We shall acquire rights either on outright basis or as share of revenue collection basis. Presently distribution rights of films are sold as: - 1. Circle wise Theatrical Rights 2. Satellite rights 3. Overseas Rights Current film distribution method involves Film Producer, Distributor & Theatre owners. Once the Film is completed, the Producer calls for Distributors for distribution. Distributors buy the right to exhibit the films in their areas. Thereafter, a distributor analyzes the theatres he feels fit to exhibit the films in his distribution area. Then the distributor and the theatre owner come into an agreement whereby the profit arising out of the exhibition of the film is shared between them. The distributors then make copies of master needed for their areas and physically move the films to the theatres. In this method the distributors and the theatre owners take the financial risk. But nowadays distributors, except for some star value films, desist from taking the risk. In these cases they only act as pure distributors like any consumer durable product distributor and take commission percentage on revenue realized from their area. Previously distributors did: - Contribute to finance of the films Took risk in the result Made prints and handled physical distribution But now for most of the films they are involved only in making print copies and physical distribution. This is one of the reasons that many films struggle for decent release especially regional language films. We do not need physical prints for distribution since every thing end-to end is digital and distributed through satellites. Therefore, we propose to acquire / distribute the entire Theatrical Rights of a film. 57

74 PYRAMID SAIMIRA THEATRE LIMITED 3. APPLICATION & TECHNICAL SERVICES 3.1 Business Process We will provide digital exhibition of any content including Theatre Management Service to any independent theatre / theatre chain and manage the Rights as well as other services which includes :- Digital Exhibition which includes content conversion, content transmission & play out at theatres Digital Rights Management Advertisement Management Theatre Management Collection Management Facilities Management These services require network management & integration. This service can be located in a place which has excellent communication connectivity, satellite up-linking facility and quality technical manpower base. Ultimately, the company s business model will ensure the following: a. Transparency in collection b. Bankability of collection c. Ability to create escrow against collection Currently, the film financing stops at the production cycle and does not extend to the collection / distribution cycle. This infirmity is due to lack of transparency and lack of bankability of box office collection. Since the our transparent accounting and immediate bankability of collection will remove this impediment, organized finance can get extended to the distribution / collection cycle also and therefore the company need not block its fund for distribution rights. Further, due to content agglomeration of all categories of films the company s risk on flops will minimize substantially. This method will ultimately provide more exhibitor share i.e. share of the company in the box office collection. This organized move will also create a positive fall out environment and will increase the total number of film produced as well as will get PSTL the best of the contents without major risk or exposure. The company has started putting the above into practice and has already distributed some movies purely on revenue share basis. TECHNOLOGY Existing Technology Currently the movies are shot in raw film (Negative). From processed negative, as many copies as needed will be made. For each release theatre, one print is required. This will be sent physically through various modes of transportations. This method suffer from the following problems : a. Cumbersome copying process and distribution methodology requiring high lead-time with huge cost to increase the number of prints b. Projection quality will vary from theatre to theatre and from day to day will vary depending upon quality and local environmental conditions c. The print can be and is often hijacked in the transportation process for piracy d. Quality variable over time with dust/ scratches/ mis handlings / coatings etc e. Exhibition quality depended on multi-various local conditions including qualitative variable like operator skill set f. Non standardized distribution g. Need huge time & effort to ramp up supply side in case of success. h. Risk of piracy i. Huge variable Cost per print 58

75 New Technology PSTL has evolved a composite satellite distribution mechanism to replace the existing film based mechanism. Here the production can be in the existing film based method itself (Film negative). This negative will be converted into digital and the digital copy will be encrypted using highest encryption mode available to prevent tampering copy right violation and piracy. This encrypted file will be sent via satellite which will be received at the theatres and stored in the respective servers at the theatres. Upon authorization from the central control room, the server will play movie using Digital projector. Though live broadcast is also possible Pyramid Saimira is using store and forward method for content distribution. In our process a simultaneous release of 12 new films is possible at any number of locations. TECHNICAL PROCESS Content conversion Encryption & copy protection Distribution Rights Management Digital Exhibition Centralized Theatre management & Facilities Management System The following is the bird s eye view of the whole technological process:- Content Transmission (Starts from Encryption) Exhibition Film to HD Physical Medium Based Satellite Based Receiving Content Hard disk or Satellite Digital Rights Management HD to Encoding Physical Hard Disk Delivery Uplink to Satellite Server Play out Encryption Downlink at Theatres Digital Projects 59

76 PYRAMID SAIMIRA THEATRE LIMITED 1 Tie-ups for activities For each of the above processes, competent technical service providers have been identified and we have reached commercial agreements with them. They are:- Convert film negative to HD: by EFX a division of Prasad Corporation Pvt. Ltd. Transmission satellite broad band two way: by Tata Net Theatre Server & play out: by Real Image Media Technologies Digital Projectors: from Bharat Digitals Limited in tie-up with M/s Delta Inc., Taiwan, based on DLP Chipsets by M/s Texas Instruments, USA. 2. Technology for Content conversion The process starts from Conversion of Film negative to Electronic Format called HD (High Definition format). From HD the content will be encoded in display file format. The general format that will be used includes MPEG; windows Media with multipole frame rates and Compression will be done to reduce the total amount of data necessary to represent the program. Image compression would be performed at the telecine studio or some other central facility. The next and most vital process is Electronic Encryption. Once the content is converted to the digital domain and compressed, a strong cryptographic protection against unauthorized use and duplication will be applied. A properly designed encryption system will prevent piracy without any degradation to the image quality. This cryptographic operation would also be performed at a central facility prior to distribution/transmission of the program to the theatres. 3. Technology for Distribution Currently films are printed and there are film rolls for each screen. These rolls are stored in big boxes & physically carted to the theatres. But in digital cinema there are two types of delivery systems: 1. Physical-media based 2. Server Based Approaches with Cartridges / Electronic transmission-based methods. Media based systems require physical delivery of the electronically stored programs from a distribution center to the theatre, much like film as distributed today. Transmission based approaches use a network solution, with the digital information being transferred to the theatres through an electronic means such as a Fiber line or over a satellite broadcast. Each approach offers unique attributes and characteristics as well as advantages and limitations. PSTL plans to adopt Satellite based IP delivery. 3.1 Media based approaches Media based distribution approaches depend on the mass duplication of an electronic master of each motion picture onto physical mass storage media and the subsequent shipment of the digital copies to the theatres. 3.2 Satellite based Digital Cinema system In this mode there will be a resident server at theatres which will receive the digital file in encrypted format. Based on Digital Rights management authorization the server will play out the file to projectors. The receiving of digital film can be physical (say Physical hard disk cartridge or through Broad band connectivity (fiber / Satellite) We have tied up with Tata Net VSAT network, whereby the film content from their Network operating center will be uplinked in IP broadcast mode to Satellite and the theatres authorized to receive this broadcast will receive the same using a VSAT dish antenna. This will be stored in the server at the theatre in the encrypted format and based on the rights authorization, the server will play out the film / content to the digital projector. Satellite delivery allows simultaneous reliable delivery virtually worldwide. In addition to the motion picture programs, movie trailers and advertising can be delivered to theatres via the same satellite system. 60

77 Automated programming of complete theatre program will ensure that proper promotional programs are shown with the intended feature. No human intervention, involving the potential for human error, is involved with the transmission, storage or presentation of the programs. A theatre manager has instant flexibility to schedule a particular program to show at a predetermined time on a selected screen, but does not have to depend on a human operator to carry out that plan. Going beyond just showing movies, satellite delivery enables new capability to transmit and present live events as they happen. Premium programs such as concerts, sporting events, fashion shows, live interviews of movie stars in conjunction with sneak previews, corporate events, and distance learning are now possible. These open opportunities for additional revenue streams for theatres. Worldwide, theatres are generally open from noon onward. Adding new presentations in the morning hours and providing new programming that will fill more seats translates directly into profits. 4. Digital Rights Management (DRM) Traditionally rights management is physical, by controlling the physical copy of the Film roll. This method has huge disadvantages like inventory management issues, piracy issues, almost impossible to track the usage etc. Digital Theatres bring in Digital Rights Management as an integral part of the system. Digital Rights Management is the method by which content protection is flexibly managed to suit the needs of business. DRM is an integral part of both electronic content protection and the electronic distribution of content and includes Copy Protection, Encrypted Content and usury rights monitoring & management and other processes in the effort to preserve copyrights and prevent theft of content in the digital world. DRM embodies the set of rules that govern the business, providing an electronic means to manage business transactions. The movie exhibition business engages in the business-to-business transfer of content. The DRM would contain the business rules that exhibitor and content owner agree to, which are read and obeyed by the devices that play the digital movie content. (Though Pyramid saimira will own the theatrical rights and operate the theatre in its name, they plan to adopt a profit center approach, where each theatre is treated as a distinct entity) One of the many promises of digital distribution of cinematic content is that a wider number of sources for content could develop. Digital distribution lowers the investment barrier for both content production and distribution. This could eventually lead to growth in the number of content providers, and most certainly will expand the types of content available from today s providers. By automating the business agreement, DRM is one of the mechanisms for lowering the cost of distribution, and thus aiding in that growth. DRM, by providing a universal means to digitally express the business agreement, will allow any content provider to employ these new distribution channels. 5. Projection systems Projectors are the last link in the digital system. In the existing projector, physical film is rolled over; powerful light is thrown against the film, which reflects upon the lens to throw the image to screen. In the digital projection system there are no physical films; only files containing information, this file is read and played out by the server to the DLP chip processor in the projector and the chip processes this information and mirrors image to DMD (digital Micro mirror device) which is reflected upon the powerful light and thrown via a lens to the screen. The white light generated by the lamp in a DLP projection system passes through a color wheel as it travels to the surface of the DMD panel. The color wheel filters the light into red, green, and blue, from which a single- chip DLP projection system can create at least 167 lakh colors. And the 3-DMD-chip system found in DLP Cinema projection systems is capable of producing no fewer than 35 trillion colors. It may be noted the basic technology of projectors has been developed by Texas Instruments and many Hardware companies use DLC and DMD along with TI reference design to produce projectors. We plan to use standard 3 chip DLP projection system with 7 true ANSI lumens, 1: 1000 contrast ratio projection, Anamorphic long throw lens for uniform brightness across screen & Hi-gain screen which enhances the vividity and also protects bulb life. Projection System is the crucial link for the catalyst for Digital conversion. So far projectors of acceptable theatrical quality were very costly. Hence the conversion processes from normal theatres to Digital Theatres was hampered. PSTL focused on:- 61

78 PYRAMID SAIMIRA THEATRE LIMITED a. Bringing down the cost of Projection System to an affordable level b. Creating the Projection System specifically tailored for Indian hazardous, environmental, electrical and operative conditions. PSTL has tied up with Bharat Digital Limited for supply of Projectors. Bharat Digital in turn has entered into a Memorandum of Understanding on , with M/s Delta Electronics, Inc., Taiwan, a renowned project manufacturer 6. Network Operating Center (NOC) & System Integration A central Network operating center to coordinate the various technical processes will be created at Chennai. The main tasks for this NOC include the following: - Receive HD in D5 and encode / compress the content (film) Transmit the content to Tata Net Data center Remote broadcast (IP Broadcast) the content and cause the theaters to receive the content through Broadband VSAT. The above two tasks will be done through Tatanet, who have taken turn key responsibility for the same. Manage Digital Rights. This is the most important task for the NOC. From here, the server at respective theaters will get authorization for play out the content. From NOC all theaters can be remotely controlled. Manage Central database and Ticketing server. NOC will manage the entire reservation system for all theaters and ensure networking of our system with other third party switches. NOC will be the central node for the closed user group network using VSAT with all our chain theaters. Complete theatre management will be monitored from here. NOC will also have MIS function. 7. Brief about technology organizations that support PSTL 7.1 Real Image Real Image Media Technologies Pvt. Ltd. has a clear focus on film, video, audio and entertainment technology. Real Image is highly regarded in the film, video and audio industries for having heralded two significant revolutions in India Digital Non-Linear Editing (AVID) and Digital Surround Sound for cinema (DTS). Real Image has also made a considerable impact in the broadcast industry with Orad Virtual Sets from the stable of Orad Hi-tec Systems, Israel. Orad specializes in the development and manufacture of video and real-time image processing technologies for the TV broadcast and post-production markets. The divisions of Real Image Group include: (a) Media Artists Audio Post Production Studios is the first studio in India to introduce several technologies including multi-track synchronization, time-code, digital audio and digital cinema sound. It is also the first studio in India to work in a totally computer based Pro Tools environment for film post- production and mixing. It is the only mix facility in the country which is THX certified. This global industry standard certification for technical excellence puts the studios in the same league as premier studios worldwide. (b) JS Films Advertising Film Production. Over the last 16 years, the Company has produced over 450 commercial / advertisement films. (c) Software Divison Qjam Music Solution: The Software Division is engaged in the development of creative solutions for the global entertainment market in the areas of film, video and audio. Their first product is an innovative digital jukebox called QjamTM. Qjam is a hard disk based music jukebox that is controlled by the user through a touch-screen interface. 62

79 We have entered into arrangements with Real Image for the following solutions-: (a) At NOC : Solution to convert HD to compressed, transferable file in Windows Media / MPEG. (b) Encryption and modular conditional access system. (c) At NOC: Digital Rights Management. (d) At Theatres: Play Out server. 7.2 Tata Net Tatanet, a Tata Group company owns and operates VSAT networks across India. Tatanet is PSTL s technical partner in their digital theatre roll out. Under the agreement entered between Tatanet & PSTL, Tatanet will install commission and maintain VSAT at our theatres and also make available requisite bandwidth facilities to transmit the movie file. Tatanet has accepted full responsibility for Transmission of Films to all our theatres.. We will use the Tatanet in the following manner: - a. Each theatre will have two-way VAST installed b. The content from our NOC will go to Tata Data center and from there it will be up-linked to Ku band satellite using VSAT and theatres will receive the content. c. VAST two-way connectivity will make all theatres in our chain and NOC as one seamless Closed User Group. This will also be used for Centralized ticketing, Digital Rights Management and other MIS function for us. 7.3 EFX - A Division of Prasad Corporation (P) Ltd. Founded by the legendry film industry personality L. V. Prasad, EFX is in the forefront of introducing cutting edge digital film processing technologies in India. Prasad Corporation Pvt. Ltd. recently commissioned Asia s first digital film lab coupled with telecine and has the capacity to process films exceeding 20 million feet per month with labs in Bhuvaneshwar, Thiruvanthapuram, Bangalore, Hyderabad and Chennai. We have tied up with EFX for conversion of films on to HD (D5) format. 7.4 Valuable Media Pvt. Ltd. [ VMPL ] VMPL s digital cinema solution is a highly comprehensive end to end digital cinema system which is equipped with many advanced features. This system is capable of providing real time satellite delivery, smart card based licensing and high end management information systems for producers and distributors. VMPL will deliver digitally mastered high quality film content through satellites directly to servers in our cinema halls. Our current agreement with VMPL is for the supply of comprehensive digital cinema equipment and solutions on a pay-per-use basis for 1000 theatres. The services will include the provision of digital cinema equipment such as projectors, servers and communication hardware as well as allied services such as content digitization and delivery via satellite to our theatres. The services of VMPL will be provided under its digital cinema initiative which is named UFO Moviez. 8. Ticket Sale management We plan to create a networked ticketing system similar to the system employed by the Indian Railways. Consumers can book tickets in advance for any show on any date in any theatre at any location.. Apart from seats, they can book facilities like transport, amusement for children, food, requests for disability assistance etc. We have introduced multiple mechanisms like virtual cards, smart cards, pre-paid cards, scratch cards, package schemes, etc. as part of innovative and ease of use of collections. These include:- Counter Walk-in Over the phone / Cell Phone / SMS Through Internet Through Retail Outlets with specialized terminals. 63

80 PYRAMID SAIMIRA THEATRE LIMITED Bank ATM s:- We plan to tie up with banks ATM network switch, which will enable any bank ATM card holder to purchase ticket for any of our theatres. Physical smart card: Smart cards will be sold which are re- chargeable just like Cell phone pre- paid cards. This can be used across locations. Based on the programmes watched by the customer the card balance will go down. Virtual Card: This operates like Phone Cards. Here cards will have value with inbuilt programming combination - say one can purchase 5 Film Cards. The Cards will have a scratchable secret number. The customer scratches and can input the number via Telephone, Cell, and Internet or inform at the counter in theatre. Credit/ Debit Card: All their theaters will have credit card interfaces and customers can purchase the same on any point of sale machine. Film Productions House Support Our project has the fullest support from Tamil Film Community. Many producers have expressed full support for this venture and assured us with supply of content. Some of them include: - 1. AVM Productions: Pioneer in the industry and owners of Asia oldest and biggest studio. Has produced over 165 films. AVM Productions have expressed their support vide their letter date 13/05/ Kavithalayaa Productions: Headed by living legend Padmashri K. Balachander, this house has produced more than 40 films and introduced most successful Artists of Tamil film industry. Kavithalaya have expressed their commitment to our endeavor vide their letter dated 18/05/ Lakshmi Movie Makers: Produced more than 25 films, with four current projects under way. They have expressed their support of our project vide their letter dated 20/04/ Vasan Brothers: The house is of 1950 era and produced number of films with MGR and Shavaji. Currently have more than 3 projects underway. They have vide their letter dated 23/05/2005, expressed their willingness to support our efforts. 5. Sathya Jyoti Films: A very prestigious production house credited with lot of state & national awards. Produced films like Moondram Pirai, Kizahku Vasal etc. Sathya Jyoti Films have expressed their support of our project vide their letter dated 18/05/ Popular Films : Popular Films has agreed to support our company vide their letter dated 20/05/ Sivasri Pictures: vide their MOU dated 28/03/2005 agreed to produce/procure and sell to PSTL on full rights basis, a minimum of 12 Tamil motion pictures per annum, i.e one film in a month starting from August Till date two films have been produced under the terms of this agreement. 8. Sri Surya Movies : Headed by Mr. A. M. Rathnam, vide their letter dated 18/02/ Super Good Films (P) Ltd. : Headed by Mr. R.B. Choudary, vide their letter dated 19/04/ GV Films Limited : Headed by Mr. P. Raghuraman, vide their letter dated 22/04/ Sri Mahalakshmi Combines has expressed their support of our project vide their letter dated 21/05/ Vaigai Cine Arts has expressed their support of our venture vide their letter dated 20/05/2005 All the above entities have confirmed their consent in writing to support PSTL. 64

81 REGULATIONS AND POLICIES Our main objective, which includes production, distribution and exhibition of films and other contents, does not require any specific regulatory licenses and approvals. Our business of content agglomeration, network service providing and mega digital theatre chain by taking theatres on lease do not require any specific license or government approval. However, operation of theatres requires license from the State government and the respective theatres must have license from the concerned State government. While taking the theatres on lease we will ensure that the theatres have valid operating licenses. No further approval from any Government authority is required by the company to undertake the activities save and except those approvals, whish may be required to be taken in the normal course of business from time to time. It must be understood that in granting the above approvals the GOI and the RBI does not undertake any responsibility for the financial soundness of the undertaking or for the correctness of any statements made or opinion expressed in this regard. 65

82 PYRAMID SAIMIRA THEATRE LIMITED HISTORY AND OTHER CORPORATE MATTERS HISTORY AND BACKGROUND OF OUR COMPANY: Our Company was incorporated on 20/06/1997 as Pyramid Films International Private Limited. The company was engaged in production of Tamil feature films and releasing them on various modes including theatres. The Company was converted to a Public Limited company and changed to Pyramid Films International Limited w.e.f. 10/08/2000 and was changed to Pyramid Entertainment and Softsystems Limited w.e.f. 14/08/2000 and was then changed to Pyramid Entertainment Limited w.e.f. 01/01/2002. The name was further changed to Pyramid Saimira Theatre Limited w.e.f. 23/08/2004 under the Companies Act, 1956 and a fresh certificate of Incorporation was received from the Registrar of Companies, Tamilnadu. The recent change in name is to reflect current thrust of the company in film distribution and exhibition sector. Our Company has been promoted by Mr. V. Natarajan in the year Even before promoting the company, Mr.V.Natarajan produced number of films and he has 30 years of experience and domain expertise in entertainment sector. He is a veteran in the film industry and produced so far 55 films in various capacities such as Executive Director/ Executive Producer/Producer. Mr. P. S. Saminathan and Mr. N. Narayanan have joined Mr. V. Natarajan as Promoters to promote Mega Digital Theatre Chain Project. Mr. P. S. Saminathan has more than 10 years domain expertise in technocommercial ventures. Mr. N. Narayanan has more than 20 years experience in man management in large organisations. The company is adequately represented by professionals in the Board and the advisory panel has representation from cross section of the media and management in the entertainment industry. Our Company now operates in the following Industry Segments:- Digital theatre Chain, Exhibition of films in theatres & Content Agglomeration Management of malls, theatres, multiplexes and other avenues of exhibition Last Mile Access for Education and other non film content Using Theatrical infrastructure Network Theatrical Application service providing across the globe MAJOR EVENTS The company was engaged in production of films, procurement of other contents and export of the same. The company has also exported television software to various countries such as Singapore, Malaysia, Mauritius, France and United Kingdom. Our company has produced 10 films. Our company had taken a strategic decision in the year 2004 to discontinue the film production line and decided to concentrate on Exhibition sector, more specifically in the field of IT Enabled Services to Exhibition Sector. The milestones achieved in the course of our project implementation are given below: Date September 2005 December 2005 May 2006 June 2006 July 2006 September 2006 Event Addition of first theatre in our chain Addition of fiftieth theatre in our chain First two multiplexes added in our chain Addition of the hundred screen in our chain Agreement with Spirit Global Constructions Pvt. Ltd. Agreement with Swatantra Land & Finance Ltd. 66

83 Changes in Registered Office of our Company Pursuant to a Resoltuion passed in the meeting of our Board on , the registered office of the company was shifted as under: Previous Address New Address Reasons for Date of Change in Office Change Royal Court, 3-B, III Floor C-1, II Floor, Temple Towers, Requirement of 01/10/2004 No.44, Venkatanarayanan Road, Premises No. 672, Old No. 476, additional space T.Nagar, Chennai Anna Salai, Chennai The requisite Form 18 for the shifting of the Registered Office was duly filed with the Registrar of Companies. MAIN OBJECTS OF THE COMPANY The main objects of our Company as contained in our Memorandum of Association are as set forth below: 1 To carry on business as film producers (sound and /or silent), hippodrome & circus proprietors, proprietors of cinema houses, theatres, concert halls and picture for amusement and/or entertainment for both private and public. 2. To carry on business as producers of feature films and /or documentary films (Indian/English) in all its branches and through all processed that may be discovered or offered from time to time, and as distributors, hirers, exhibitors and negatives holders of documentary and feature films of all languages. 3. To make, trade in, act as agents for (wholesale and /or retail) and produce cinematographic films (silent and talkie) and deal in sound producing, synchronized, stereoscopic, 3-D, coloured, bioscopic, cinemascope and Cinerama pictures and to deal in and/or act as agents for blank and /or pre-recorded videos and/or audio cassettes. 4. To carry on business as proprietors and/or lessees of film studios, erecting and running studios, film laboratories, cinema halls halls, theatres, television studios for exhibiting films andfor musical performances and to carry on business as owners of touring cinemas and theatres and give such touring cinemas, studios or theatres either on lease or on rent. 5. To carry on business as film publicity agents, designers, engravers for film publicity materials and as printers for film publicity and photography, either alone or in partnership with individuals and/or bodies. 6. To lend and/or supply artists, artistic talents and technicians to producers of cinematograph films and for that purpose to employ artists as paid servants of the company to be readily available for such business. 7. To purchase or otherwise takeover, acquire and undertake the whole of the business of any person, firm or company carrying on any business which the company is authorized and to pay for the properties, rights or privileges acquired by this company in shares of this company. The clause of the Memorandum of Association of our Company enables us to undertake activities for which funds are being raised in this Issue. The existing activities of our Company are in accordance with the object clause of our Memorandum of Association. CHANGES IN MEMORANDUM OF ASSOCIATION Date Amendments 10/07/2000 Face value of the Equity shares were reduced from Rs.100/- per share to Rs.10/- per share 10/07/2000 Object clause was amended 10/08/2000 The company was converted to Public Limited and the name was changed to Pyramid Systems International Ltd. 14/08/2000 Name of the company was changed to Pyramid Entertainment and Softs System Ltd. to reflect activities of this company in IT enabled industry 01/01/2002 Name changed to Pyramid Entertainment Ltd. 23/08/2004 Name changed to Pyramid Saimira Theatre Ltd. 31/03/2005 Increase in the authorized share capital of the company from Rs. 50 lakhs to Rs. 5 crores 23/05/2005 Increase in the authorized share capital of the company from Rs. 5 crore to Rs. 33 crore 67

84 PYRAMID SAIMIRA THEATRE LIMITED SHAREHOLDERS AGREEMENT We have entered into a Shareholders Agreement dated 31/05/2006 with Bennet, Coleman & Company Ltd. [ BCCL ], wherein BCCL agreed to subscribe to 5,00,000 Equity Shares of Rs. 10/- each of our Company at a price of Rs. 80/- per Equity Share. The allotment for the same was completed on 03/06/2006. The salient features of the agreement are as follows: a. The shares allotted to BCCL shall be subject to lock-in for a period of 36 months from the date of allotment or for such period as may be determined under applicable law at the time of the IPO in accordance with the SEBI (DIP) Guidelines, 2000 and subsequent amendments thereto. b. Our Company and our promoters shall make reasonable endeavours to conduct an IPO within 3 years from date of allotment of shares to BCCL c. In the event that our Company makes any further issue of Equity Shares at a price lower than the subscription price, our Company shall issue fresh Equity Shares as part of the further issue at a price such that the weighted average price of the shares held by BCCL and the shares acquired in the fresh offering shall be equal to the price at which the shares are being issued in the further issue. In the event that our Company is unable to offer the shares to BCCL, our Promoters shall sell such number of shares held by them at a price such that the weighted average price of the shares held by BCCL and the shares acquired from the Promoters shall be equal to the price at which the shares had been issued in the further issue. d. Our Promoters shall not either alone or jointly with any other person, directly or indirectly engage in any business which competes with our business. e. In case the price at which shares are issued in our IPO is lower than Rs. 80/- per share, our Promoters shall transfer such number of shares to BCCL, at no consideration, such that the weighted average price of the shares held by BCCL and the shares transferred by our Promoters to BCCL is equal to the Issue Price of our IPO as determined by the Book Building mechanism. f. In the event that our Company s IPO is not completed within 3 years from the date of allotment of shares to BCCL i.e. 03/06/2006, BCCL shall have the right to require our Promoters to purchase all or some of the shares held by BCCL at a price not less than the sale price as determined as per the clauses of the Shareholders Agreement. g. In case our Promoters decide to sell or dispose of all or part of their holding in our Company to a third party who is not an affiliate of our Promoters, our Promoters shall provide notice of such proposed sale to BCCL no later than 30 days prior to the closing of such sale. Our Promoters shall not be permitted to carry out such a sale unless the concerned third party makes an offer in writing to BCCL to purchase a pro-rata portion of the shares held by BCCL on the same terms and conditions as that offered to our Promoters. 68

85 OUR MANAGEMENT BOARD OF DIRECTORS Sl. No. Name, Qualification,Address Age Nationality Other Directorships and Designation (In Yrs) 1 Mr. V. Natarajan 62 Indian Nil S.S.L.C.New No.42 (Old No.48A), Mahadevan Street, West Mambalam, Chennai Chairman 2 Mr. P.S. Saminathan 39 Indian M/s Bharat Digitals Ltd. B.Com., I.C.W.A., 2/540, Kumaran Street, Balaiah Gardens, Madipakkam, Chennai Managing Director 3 Mr. N. Narayanan 58 Indian Nil B. Com. B.G.L., M.B.A., No.1, I Floor, Viswa Kamal, No.245, R.K. Mutt Road, Mylapore, Chennai Director 4 Dr. S. Ramani 70 Indian M/s Easun Reyrolle Ltd. B.E. (Mechanical Engg.), B.E. (Electrical Engg.), P.G.D.M., Ph.D.No.48, Sathyadev Avenue MRC Nagar, R.A. Puram, Chennai Director 5 Mr. K. Natarahjan 60 Indian Nil B.Sc (Maths), C.A.No. 57/2, Soundarya Apt. 5 th Cross, Logaiah Colony, Saligramam, Chennai Director 6 Mr.K.S.Kasiraman 68 Indian Nil M. Com., LL. B. FCS. ACIS No.57/2, Dr. Rangachari Road Chennai Director 7 Mr. Nirmal Kotecha 29 Indian SKYZ Financial Consultants Pvt. Ltd. B.Com601, Sukh Niwas, Nishwet Management Services Pvt. Opp HDFC Bank Bhandarkar Road, Ltd. Kings Circle, Matunga CR, Nirman Management Services Pvt. Mumbai Ltd. Director 69

86 PYRAMID SAIMIRA THEATRE LIMITED Sl. No. Name, Qualification,Address Age Nationality Other Directorships and Designation (In Yrs) 8. Dr.. M. S. Narasimhan 65 Indian Nil PHD (Electrical Engineering) Flat D 2 Krishna ParadiseNo. 6 Ramachandra Road, Luz., Mylapore, Chennai Director BRIEF BIOGRAPHY OF OUR DIRECTORS The Board of Directors of Pyramid Saimira Theatre Limited comprises of: Mr. V. Natarajan Mr. V. Natarajan aged 62 year has done S.S.L.C. He is popularly known as Pyramid Natarajan and has experience spanning over 4 decades in Film / content production, management and distribution. He started his career with historic Gemini Studios and then joined hands with K.Balachander to nurture Kavithalayaa, which seeded the Golden era in Tamil Film Industry. He is experienced in the industry and has presided over many context changes in the Industry for over 20 years. He is an executive committee member of various Trade Bodies like Tamil Film Producers Council & South Indian Film Chamber of Commerce. He is also a member of the government body formed to deal with film industry and also an advisory committee member on Film Taxation. He has successfully seeded and nurtured various content producing companies and is a leading light in this venture. Mr. P. S. Saminathan Mr. P. S. Saminathan aged 39 years is a graduate in commerce from Loyola College, Chennai and is a Cost Accountant. He has worked in an Investment Company in the capacity of Head Finance, where he has handled appraisal, disbursement, monitoring and recovery. Mr. P. S. Saminathan has more than 18 years of domain expertise in technocommercial ventures including stints at M/s. Value Added Funds Management Ltd., a private equity fund, M/s. Jupiter Trades, a cable TV Multi System Operator in Chennai and M/s. Aquastride, a consultancy organization in the field of bioscience. He is experienced in Convergence Field and is a businessman with wide and varied experience in Cable and Television, Communications, Networking. Mr. N. Narayanan Mr. N. Narayanan aged 58 years is a graduate in commerce from Delhi University. He has also done B.G.L. from Madurai Kamaraj University and M.B.A from Indira Gandhi Open University. He has senior level management exposure from 1970 onwards. His exposure is in the field of Leadership, Man-Management, and providing cohension among diverse experts. Mr. N. Narayanan has more than 20 years experience in man management in large organizations such as Enfield India Ltd. and Ashok Leyland Ltd., both automobile manufacturers. He is also active in various spheres of business, culture and social activities. Dr. S. Ramani Dr. S. Ramani, an educationalist par excellence was Professor in IIT Chennai. He went on to become the vice- chancellor of Sankara University. He serves as an advisor in scores of universities and guides innumerable PhD scholars. His specialization includes Industrial engineering, Knowledge management, Application of technology in practice and most importantly in Education as a means of social development. He has served in many state & central panels and also distinguished in being a Director of State Bank of India for eight years. Mr. K. Natarahjan A Chartered Accountant by profession started his career in Fraser & Ross in the year 1970, and had a distinguished service in Ashok Leyland from 1972 to He has designed the entire gamut of internal control systems, Audit systems and other procedures for Ashok Leyland. 70

87 Mr. K.S. Kasiraman Mr.K.S.Kasiraman was previously the Chairman of Southern India Regional Council of Institute of Company Secretaries of India.He is an Associate Member of Chartered Institute of Secretaries, London, Fellow Member of Institute of Company Secretaries, India and also an Associate Member of All India Management Association. He has 45 years of experience in Secretarial and Management affairs of public companies. He was also the man behind Fund mobilization and Public issue of Ashok Leyland Finance and other Ashok Leyland group companies. Mr. Nirmal Kotecha Mr. Nirmal Kotecha aged 29 years is a Graduate in Commerce. He is an investment advisor and an active participant in investment and financial fields. Dr. M. S. Narasimhan Dr. Narasimhan holds a doctorate in Electrical Engineering from IIT Bombay and was a distinguished Faculty member of IIT Madras. During his tenure with IIT Madras he held many important positions including heading the Centre for Systems and Devices. He is versatile in Telecommunication Engineering. BORROWING POWERS OF DIRECTORS The Members have authorized the board to borrow, at the EGM held on 31/03/2005, the extract of which is as follows: RESOLVED THAT the unanimous consent of the Members of the Company be and is hereby accorded in term of Section 293 (1) (d) and other applicable provisions if any, of the Companies Act, 1956 to the Board of Directors of the company for borrowing from time to time as it may consider fit upon such terms and conditions as it may deem fit, any sums of money which together with the monies already borrowed by the Company (apart from temporary loans obtained or to be obtained from the Company s Bankers / Financial Insitutions or any other Lenders in the Ordinary Course of Business. May exceed the aggregate of the paid up capital and free reserve and surplus of the company, that is to say, reserves not set apart for any specific purposes, provided that such excess as determined by the amount so borrowed by the Board shall not, at any time exceed Rs.500 crores (Rupees Five Hundred Crores only) SHAREHOLDING OF OUR DIRECTORS As per our Articles, our Directors are not required to hold any Equity Shares in our Company. Save and except as stated below, our Directors do not hold any Equity Shares in our Company as on the date of filing of this Red Herring Prospectus. S. No. Names of our Directors No. of Equity Shares 1. Mr.V.Natarajan 10,02, Mr.P.S.Saminathan 29,25, Mr.N.Narayanan 14,93, Mr.K.Natarahjan 10, Dr.S.Ramani NIL 6. Mr.K.S.Kasiraman NIL 7. Mr. Nirmal Kotecha 83,10, Dr. Narasimhan NIL INTEREST OF PROMOTERS, DIRECTORS AND SIGNIFICANT SHAREHOLDERS All Directors of our Company may be deemed to be interested to the extent of fees, if any, payable to them for attending meetings of the Board or a Committee thereof as well as to the extent of other remuneration, reimbursement of expenses payable to them under our Articles of Association. The whole time directors will be interested to the extent of remuneration paid to them for services rendered by them as officers or employees of our Company. All our directors may also be deemed to be interested to the extent of equity shares, if any, already held by them or their relatives in our Company, or that may be subscribed for and allotted to them, out of the present Issue in terms of the Red Herring Prospectus and also to the extent of any dividend payable to them and other distributions in respect of the said equity shares. 71

88 PYRAMID SAIMIRA THEATRE LIMITED REMUNERATION OF OUR MANAGING DIRECTOR / WHOLETIME DIRECTORS Extract of resolution passed at the EGM on 05/07/2005: Resolved that pursuant to Sections 198, 269, 309, 316 and other applicable provisions, if any, of the Companies Act, 1956 and the laws prevailing for the time being and subject to the Schedule XIII to the Act, with such alterations and modifications if any, that may be effected by the Central Government, pursuant to any change in policies, or laws, guidelines, rules and regulations relating to the managerial remuneration, consent of the members of the company be and is hereby accorded for following remuneration package payable to Mr.P.S.Saminathan, as Managing Director of the company for his remaining tenure as Director: Salary Scale : Minimum Rs.1,00,000/- to maximum of Rs.2,00,000/- per month as may be determined by the Board from time to time. Perquisites: Perquisites shall be restricted to an amount equal to annual salary or Rs.24,00,00/- whichever is less. Further resolved that the aforesaid salary and perquisite shall be payable to Mr.P.S.Saminathan even in case of inadequate profit or losses in any financial year of the company. Extract of resolutions passed at the AGM held on 09/09/2006: (a) (b) RESOLVED THAT pursuant to Section 198, 269, 309 and under applicable provisions, if any of the Companies Act 1956, and the laws prevailing, for the time being and subject to Schedule XIII to the Act, with such alterations and modifications, if any, that may be effected by the Central Government, pursuant to any change in policies, or laws, guidelines, rules and regulations relating to the managerial remuneration, approval and consent of the member of the Company be and is hereby accorded for the appointment of Mr. V.Natarajan as a Whole Time Director of the Company and for the following remuneration package payable to him with effect from for a period of 3 years. Salary Scale : Minimum of Rs.1,00,000/-(Rupees One Lakh only) to maximum of Rs.2,00,000/-(Rupees Two Lakhs only) per month as may be determined by the Board from time to time. Perquisites : Perquisites shall be restricted to an amount equal to annual salary of Rs.24,00,000/-(Rupees Twenty Four Lakhs only) whichever is less. RESOLVED FURTHER THAT the aforesaid salary and perquisites shall be payable to Mr.V.Natarajan even in case of absence or inadequacy of profit in any financial year, during his term of Office as Whole Time Director in accordance to the Provisions of Section II of Part II of Schedule XIII to the Companies Act RESOLVED THAT pursuant to Section 198, 269, 309 and under applicable provisions, if any of the Companies Act 1956, and the laws prevailing, for the time being and subject to Schedule XIII to the Act, with such alterations and modifications, if any, that may be effected by the Central Government, pursuant to any change in policies, or laws, guidelines, rules and regulations relating to the managerial remuneration, approval and consent of the member of the Company be and is hereby accorded for the appointment of Mr. N.Narayanan as a Whole Time Director of the Company and for the following remuneration package payable to him with effect from for a period of 3 years. Salary Scale : Minimum of Rs.1,00,000/-(Rupees One Lakh only) to maximum of Rs.2,00,000/-(Rupees Two Lakhs only) per month as may be determined by the Board from time to time. Perquisites : Perquisites shall be restricted to an amount equal to annual salary of Rs.24,00,000/-(Rupees Twenty Four Lakhs only) whichever is less. RESOLVED FURTHER THAT the aforesaid salary and perquisites shall be payable to Mr.N.Narayanan even in case of absence or inadequacy of profit in any financial year, during his term of Office as Whole Time Director in accordance to the Provisions of Section II of Part II of Schedule XIII to the Companies Act

89 CHANGES IN OUR BOARD OF DIRECTORS DURING THE LAST THREE YEARS Name of the Director Date of Joining Date of Resignation V. Natarajan 20/07/ /03/2004 Reappointed on 04/04/2004 V. Naagarajan 05/10/ /08/2004 S. Padmanabhan 06/05/ /08/2004 V. Vengatesan 01/07/ /05/2003 S. Meera Naagarajan 01/07/ /12/2002 Vijay Baskar 07/12/ /05/2003 S. Mohan 05/10/ /05/2003 Kumar Natarajan 15/03/ /08/2004 P.S.Saminathan 02/08/200430/09/2004 (appointed as MD by the shareholders at their EGM) N. Narayanan 02/08/2004 Dr.S. Ramani 09/11/2004 K. Natarahjan 09/11/2004 K.S.Kasiraman 21/02/2006 Niraml Kotecha 28/06/2006 T. M. Venkataram 28/06/ /10/2006 Dr. M. S. Narasimhan 17/10/2006 CORPORATE GOVERNANCE The provisions of the Listing Agreement to be entered into with the Stock Exchanges with respect to corporate governance and the SEBI Guidelines in respect of corporate governance will be applicable to our Company immediately upon the listing of our Company s Equity Shares on the Stock Exchanges. Our Company undertakes to adopt the corporate governance code as per Clause 49 of the Listing Agreement to be entered into with the Stock Exchanges prior to listing. Our Company undertakes to comply with such provisions, including with respect to the appointment of independent directors to its Board and the constitution of the Audit Committee, the Remuneration/Compensation Committee and the Share Transfer and Investor Grievance Committee. However, at present the following committees have been formed: Audit Committee We have an Audit Committee, which has been constituted pursuant to provisions of the Companies Act. The Audit Committee was approved and constituted and formed by a meeting of the Board of Directors held on 22 nd June 2005, comprising of : Members of the Audit Committee: Mr.K. Natarahjan Chairman Independent Director Chartered Accountant Mr.P.S. Saminathan Member Director Cost Accountant Dr.S. Ramani Member Independent Diretor Doctorate in Engineering 73

90 PYRAMID SAIMIRA THEATRE LIMITED The terms of reference of the Audit Committee are as follows: 1. to oversee the Company s financial reporting process and to ensure that the financial statements are correct, sufficient and credible; 2. to recommend appointment or removal of statutory auditor and to recommend remuneration payable to the auditors; 3. to review with management the financial statements before the board in the context of change in accounting policies, qualifications in the audit report, compliance of accounting standards, significant adjustments, arising out of audit and any related party transactions that may have the potential conflict with the interest of the Company; 4. to review the adequacy of internal audit function including structure, reporting, coverage and frequency of internal audit, discussion with the internal auditor for any significant findings and follow up thereof; 5. to review findings of any internal investigations by the internal auditors where there is suspected fraud or irregularity or failure of internal control system of material nature which require reporting to the board; and 6. to look into any other matters as may be required by the Companies Act, 1956 or by rules framed thereunder. Remuneration/Compensation Committee The Remuneration/Compensation Committee was approved and constituted by a meeting of the Board of Directors held on 1 st June 2005, comprising of: Members of the Remuneration / Compensation Committee: Mr. K. Natarahjan Chairman Independent Director Chartered Accountant Mr. N. Narayanan Member Director MBA Dr. S. Ramani Member Independent Diretor Doctorate in Engineering Mr. K. S. Kasiraman Member Independent Director Company Secretary The broad terms of reference of the Remuneration/Compensation Committee are as follows: (i) to recommend to the Board, the remuneration packages of the Company s Managing/Joint Managing/Deputy Managing/Whole time/ Executive Directors, including all elements of remuneration package (i.e. salary, benefits, bonuses, perquisites, commission, incentives, stock options, pension, retirement benefits, details of fixed component and performance linked incentives along with the performance criteria, service contracts, notice period, severance fees etc.); (ii) to be authorized at its duly constituted meeting to determine on behalf of the Board of Directors and on behalf of the shareholders with agreed terms of reference, the Company s policy on specific remuneration packages for Company s Managing/Joint Managing/Deputy Managing/Whole time/ Executive Directors, including pension rights and any compensation payment; Share Transfer and Investor Grievance Redressal Committee The committee was approved and constituted by a meeting of Board of Directors held on June 22, 2005, comprising of following Directors: Dr.S.Ramani Chairman Independent Diretor Doctorate in Engineering Mr.K.Natarahjan Member Independent Director Chartered Accountant Mr.V.Natarajan Member Director Film Producer Policy on Disclosures and Internal Procedure for Prevention of Insider Trading The provisions of Regulation 12 (1) of the SEBI (Prohibition of Insider Trading) Regulations, 1992 will be applicable to our Company immediately upon the listing of its Equity Shares on the Stock Exchanges. We shall comply with the requirements of the SEBI (Prohibition of Insider Trading) Regulations, 1992 prior to listing of our Equity Shares. 74

91 ORGANISATION CHART PYRAMID SAIMIRA THEATRE LIMITED 75

92 PYRAMID SAIMIRA THEATRE LIMITED OUR KEY MANAGERIAL PERSONNEL The Key Managerial Personnel of our Company are as follows: S. No Name, Address & Designation Age Qualification Date of Total No. of years (years) appointment of Experience & the nature of experience 01 Mr. R. Manthramurthy 54 ACS B.com 10/06/ Years G-4, Benco Flats, Flat No. 47, Experience in 1st Cross Street, Besant Nagar, Finance, Accounting Chennai and Company Company Secretary Secretarial practices 02 Mr. Srinivasan Varadarajan 29 PDGCA B.Com 02/05/ Years Experience No.16, South Canal Bank Road, in Software, Mandaveli, Chennai Hardware MIS Vice President Technical Reporting expertise and System Analysis design 03 Mr. T.N.Srinivasan 47 B.Com M.B.A 02/05/ Years No.11, Tagore Street, MMDA Nagar, (Marketing) Experience in Chitlapakkam, Chennai Cinema Theatre DGM Theatre Identification Industry & Marketing 04 Mr. P. Balasubramanian 58 B.Com 01/09/ Years #32/12, South Mada Street, Experience in Thiruvottiyur, Chennai Accounting & HR DGM Theatre Acquisition 05 Mr. V. Santhanam 50 M.B.A. (Finance) 04/11/ Years # 28, Gandhi Nagar, Experience in Alwar Thirunagar Post, Finance & Statuary Chennai Accounting DGM Finance & Accounts The above personnel are on the permanent rolls of our Company. SHAREHOLDING OF OUR KEY MANAGERIAL PERSONNEL Our key managerial personnel do not hold any shares of our Company. CHANGES IN OUR KEY MANAGERIAL PERSONNEL DURING THE LAST THREE YEARS Our Company has started the Project only recently. All our employees have been appointed in the past 18 months, as referred to the list of Key Management Personnel. The changes in the key managerial personnel during the last three years is given below: S. No Name Designation Date of Appointment Date of Resignation 01 Mr. E. Sreenivasan Manager VSAT Networking 26/12/ /09/ Mr. Ravi Selvarajan VP Finance & Accounts 05/04/ /06/ Mr. Pradeep Kumar Baid President Finance 05/10/ /03/2006 and Accounts 76

93 RELATIONSHIP WITH DIRECTORS / OTHER KEY MANAGERIAL PERSONNEL Mr. V. Srinivasan, Vice President (Technical), is the son-in-law of Mr. N. Narayanan, Director of the Company. Besides this, none of our key managerial personnel are related to our promoters, directors and other key managerial personnels. EMPLOYEE STOCK OPTION SCHEMES Our Company has not introduced any Employees Stock Option Scheme/Employee Stock Purchase Scheme. INTEREST OF KEY MANAGERIAL PERSONNEL No amount or benefit has been paid or given within the two preceding years or are intended to be given to any of our Directors or key managerial personnel except the normal remuneration for services rendered as directors, officers or employees. PAYMENT OR BENEFIT TO OFFICERS OF THE COMPANY No amount or benefit has been paid or given or is intended to be paid or given during the preceding two years to any of its officers except for the normal remuneration paid to Directors, officers or employees since the incorporation of the Company. None of the beneficiaries of loans, advances and sundry debtors are related to the Company s Directors. 77

94 PYRAMID SAIMIRA THEATRE LIMITED OUR PROMOTERS AND THEIR BACKGROUND Mr. V. Natarajan aged 62 year has done S.S.L.C. He is popularly known as Pyramid Natarajan and has experience spanning over 4 decades in Film / content production, management & distribution. He started his carrier with Gemini Studios and then joined hands with K.Balachander to nurture Kavithalayaa. He is Executive Committee member of various Trade bodies like Tamil Film Producers Council & South Indian Film Chamber of Commerce. He is also a member in the government body formed to deal with film industry & also an advisory committee member on Film Taxation. The voter ID of Mr. V. Natarajan is TN/03/009/ and driving license no is R/TN/009/ /2003 Mr. P. S. Saminathan aged 39 years is a graduate in commerce from Loyola College, Chennai and is a fellow member of Institute of Cost and Works Accountant of India (ICWA). He has worked in an Investment Company in the capacity of Head Finance, where he has handled appraisal, disbursement, monitoring and recovery. He has experience and exposure in various industries like construction, engineering and fabrication, aquaculture, consumer durables etc. He has also worked in the capacity of a Senior Consultant for M/s Aquastride, a Consultancy Organisation in Bio-science. He is active in the field of convergence with wide and varied experience in Cable and television, Communications, Networking. The voter ID of Mr. P. S. Saminathan is TN/03/020/ Mr. N.Narayanan aged 58 years is a graduate in commerce from Delhi University. He has also done B.G.L. from Madurai Kamaraj University and M.B.A from Indira Gandhi Open University. He has senior level management exposure from 1970 onwards. His exposure is in the field of Leadership, Man-Management, and providing cohension among diverse experts. He is also active in various spheres of business, culture and social activities. The voter ID of Mr. N. Narayanan is TN/03/013/ We confirm that the Permanent Account Numbers, Bank Account Numbers, Passport Numbers have been submitted to the Stock Exchanges at the time of filing of the Red Herring Prospectus. Further, our Promoters have not been detained as a willful defaulter by the Reserve Bank of India or any other Government authority and there are no violations of securities laws committed by the Promoters in the past or any such proceedings are pending against the Promoters. OUR PROMOTER GROUP COMPANIES There are no group companies under the same management RELATED PARTY TRANSACTIONS For details of our related party transactions, please see Annexure 9 of our Restated Financial Statements beginning on page 91 of this Red Herring Prospectus. 78